Lagos, 12 March 2020 — Global Credit Ratings has affirmed the long term national scale credit rating of BBBNG), assigned to Eat & Go Finance SPV Plc’s Series 1 Senior Unsecured Bonds, with the outlook accorded as Stable. The bonds rating expires in October 2020.
RATING RATIONALE OF THE ISSUER
Global Credit Ratings (“GCR”) has accorded the above credit rating to Eat & Go Finance SPV Plc’s Series 1 Bonds based on the following key criteria:
In December 2019, Eat & Go Finance SPV Plc (“EGF” or “the Issuer”) raised an initial N11.5bn in Series 1 Bonds, under its N15bn Bond Issuance Programme. The Series 1 Bonds have a tenor of 7 years with a fixed interest rate of 14.25% payable semi-annually in arrears. The Bonds constitute direct, unconditional, senior and unsecured obligations, ranking pari passu with all other senior and unsecured obligations of the Issuer.
Eat ‘N’ Go Limited (“ENG”), the Issuer and the Trustee (acting on behalf of the bondholders) have entered into a guarantee agreement pursuant to which ENG, in its capacity as Guarantor, irrevocably and unconditionally guarantees the punctual and full payment of all debts and obligations owed by the Issuer under the Programme. Pursuant to the Deed of Covenant, ENG undertakes that if the Issuer does not pay any of the obligations, it will immediately perform the payment obligations of the Issuer as if it were the primary obligor. In addition, GCR has received a legal opinion which confirms inter alia that ENG’s Guarantee is irrevocable, unconditional and enforceable in line with its terms.
ENG is one of the leading players in the Nigerian Quick Service Restaurant sector, with its operation underpinned by well-established international brands, major alliances with suppliers, experienced management team as well as strong shareholder and franchisor support. GCR downgraded ENG’s national scale long term rating to BBB(NG) in November 2019.
The Programme Trust Deed does not offer Bondholders any security over fixed assets but features a negative pledge, a debt service reserve account, and other covenants to protect the interest of Bondholders. The bond documents also contain covenants that stipulate a minimum net debt to EBITDA covenant of 4x and net debt to Equity ratio of 4x. These covenants could be tested if the very strong earnings projections do not materialise. This could lead to a downgrade of the Sponsor and the bond rating if GCR observes that these covenants has been breached.
The ‘BBB(NG)’ public, long term national scale credit rating accorded to the Series 1 Bonds is equalised to the rating of ENG, as the Guarantee offers timely and full coverage of all payments due to the bondholders, under the Bonds.
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APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Master Criteria for Rating Corporate Entities, updated February 2018
Eat ‘N’ Go Limited rating reports, 2018-2019
Glossary of Terms/Ratios (February 2018)
RATING LIMITATIONS AND DISCLAIMERS
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SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating process 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 bonds rating expires in October 2020.
Eat & Go Finance SPV Plc 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 Bonds rating has been disclosed to Eat & Go Finance SPV Plc.
The information received from the Issuer, the lead Issuing House and other reliable third parties to accord the Bond rating included: Shelf Prospectus, Series 1 Pricing Supplement, Deed of Covenant, Legal Opinion, Programme Trust Deed as well as the Series 1 Trust Deeds.
The rating above was solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the rating.