Lagos Nigeria, 12 February 2019 — Global Credit Ratings (“GCR”) has accorded final public ratings of ‘AA+(NG)’ and ‘A(NG)’ to Mixta Real Estate Plc’s N2.961bn Series 2 Tranche A Guaranteed Bonds and N2.32bn Series 2 Tranche B Secured Bonds respectively, with the Outlook accorded as Stable. The final bond ratings expire in August 2019.
GCR has accorded the above credit ratings to Mixta Real Estate Plc’s (the “Issuer”) Series 2 Tranche A and Tranche B Bonds based on the following key criteria:
The Issuer is a leading domestic real estate development company, with operations spanning the residential, commercial and retail property segments. The Issuer’s significant real property (valued at N100bn at FY17), strong shareholder support and technical alliances with major industry players are key competitive advantages. GCR affirmed the Issuer’s long-term rating at ‘BBB(NG)’ with a Stable Outlook in June 2018.
The Issuer registered a N30bn Medium Term Note Programme with Securities and Exchange Commission in December 2016. In January 2017, about N4.5bn was raised from the capital market under its Series 1 Bond Issue. Mixta Nigeria raised additional N2.961bn and N2.32bn under Series 2 Tranche A Guaranteed Bonds and Series 2 Tranche B Secured Bonds Issue respectively in September 2018, at a fixed annual interest rate of 16.5% and 17.75% each. The Series 2 Tranche A and B have a five-year tenor each, with the legal maturity date being 12 October 2023. Principal repayment will commence in April 2021, following expiration of the two-year moratorium. The Series 2 Bonds constitute direct, senior, unconditional and unsubordinated obligations of the Issuer.
GuarantCo and the Trustee (acting on behalf of the bondholders) have entered into a guarantee agreement pursuant to which GuarantCo, in its capacity as Guarantor, guarantees the payment of i) 100% of the aggregate outstanding Principal Amount and ii) one semi-annual interest payment, both relate to the Series 2 Tranche A Bonds, and subject to a maximum guaranteed payment of N3.205bn on the transaction Closing Date. Legal opinion provided to GCR indicates that the Guarantee constitutes a legal, valid, binding and enforceable obligation of the Guarantor. Under the Guarantee, payments must be made no later than 15 business days after such amount is due and payable by the Guarantor. The Guarantee will be in force until all payment obligations have been fully discharged.
A Deed of third party legal mortgage has been executed by the Closing Date of the Series 2 Bonds Issue. Pursuant to the transaction documents, land of 242ha and 76ha have been pledged in favour of the Guarantor and the bondholders respectively. According to the Series 2 Tranche B Trust Deed, provision has been made to perfect securities, in an enforcement scenario, to the full value of the aggregate Principal Amount. The Series’ Trust Deeds feature a negative pledge and other covenants, to protect the interests of bondholders.
GuarantCo is rated ‘AA-’ by Fitch Ratings and ‘A1’ by Moody’s with a Stable outlook. GCR is of the view that the credit quality of GuarantCo is commensurate with a ‘AAA(NG)’ long-term national scale rating.
The rating of the Series 2 Tranche A Bonds is derived by notching against the Guarantor’s long-term national scale rating of ‘AAA(NG)’. However, in a worst case stress scenario (from a default timing perspective), the Guarantee could cover slightly less than 100% of principal and interest payable.
The rating of Series 2 Tranche B Bonds is derived by applying a notching up approach, starting from the long-term corporate credit rating of the Issuer. While GCR’s estimated recovery calculations show that Series 2 Tranche B bondholders can expect full recovery, the amount that will be realised on the security package depends on the value stamped and registered with the government authorities. As such, a three-notch uplift is considered appropriate for the Series 2 Tranche B Bonds.
The final rating accorded to each tranche relates to ultimate payment of interest and principal. It should be noted that a downgrade in the rating of the Issuer and/or Guarantor; and a change in recovery prospects could impact the final ratings to be accorded.
NATIONAL SCALE RATINGS HISTORY
Initial/Last rating – Indicative (August 2018)
Series 2 Tranche A: AA+(NG)
Series 2 Tranche B: A(NG)
Rating outlook: Stable
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APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Master Criteria for Rating Corporate Entities, updated February 2018,
Global Summary Structurally Enhanced Corporate Bonds Rating Criteria (November 2018),
Mixta Real Estate Plc Issuer rating reports, 2016-18,
Glossary of terms/ratios, February 2018.
RATING LIMITATIONS AND DISCLAIMERS
SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the Bond ratings expire in August 2019.
The Issuer and the Lead Issuing House participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The credit ratings have been disclosed to the Issuer.
The information received from the Issuer, the lead Issuing House and other reliable third parties to accord the Bond rating included:
Series 2 Pricing Supplement, Deed of Guarantee, Deed of Third Party Legal Mortgage, Recourse Agreement, Programme Trust Deed, Series 2 Tranche A Trust Deed, Series 2 Tranche B Trust Deed, Legal Opinion from Udo Udoma & Belo-Osagie, and Legal Opinion from Gowling WLG (UK) LLP.
The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.