Announcements

GCR accords ratings to Delta State; N50bn bond

GCR has accorded the Delta State Government (“Delta State”) a national scale Naira currency long term issuer rating of A- (single A minus), and the State’s N50bn Fixed Rate Bond (being the first tranche of a N100bn bond issuance programme) a national scale Naira currency rating of A+ (single A plus). Delta State was formed out of the previous Bendel State in 1991, and is divided into 25 local government areas that operate under 3 senatorial districts.

The issuer rating is supported by Delta State’s strategic importance as one of the largest oil producing states in Nigeria (generating in excess of 30% of Nigeria’s total oil output). Furthermore, the State is one of the largest in Nigeria by revenue. In addition, Delta State exhibits adequate levels of liquidity, supported by a portfolio of longer dated investments. The sustained substantial reliance on statutory allocations (representing in excess of 85% of total annual income) to support operational requirements is, however, noted, particularly in light of the fact that this is highly dependent on the volatile oil price. Moreover, the challenging political environment in Nigeria was also considered.

The N50bn Fixed Rate Bond is secured by an Irrevocable Standing Payment Order issued by the Federal Government, which provides significant support to this rating. The bond issuance will see an initial sharp rise in gearing to around 40%, with future gearing metrics to be dictated by the timing of additional bond programme issues.

Marc Joffe
https://globalratings.net/uploads/files/Insights_Jan_2012.pdf

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