Announcements Financial Institutions Rating Alerts

GCR Affirms InfraCredit’s Rating of AAA(NG); Outlook Stable.

Lagos, 26 July 2018 — Global Credit Ratings has affirmed the public national scale long term rating of AAA(NG) accorded to Infrastructure Credit Guarantee Company Limited ; with a Stable Outlook. The rating is valid until May 2019.

RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above final credit rating based on the following key criteria:

The rating accorded to Infrastructure Credit Guarantee Company Limited (“InfraCredit” or “the company”) reflects its operational uniqueness, capital structure, governance structure, and risk mitigation mechanisms. InfraCredit was established under a collaboration arrangement between Nigeria Sovereign Investment Authority (“NSIA”) and GuarantCo, with the sole mandate of providing guarantees to enhance the credit quality of local currency debt instruments (mainly bonds) issued by entities (corporates and state governments) to finance eligible infrastructure projects in Nigeria. InfraCredit fully commenced operations in 2017 and finalised its first deal to provide guarantee for a ten year N10bn infrastructure bond during the year.

Coginsnace is taken of GuarantCo’s financial support to InfraCredit through provision of contingent capital, and technical support in key operational areas (credit and risk management). Specifically, as the lead contingent capital provider, Guarantco is entitled to a seat on the board of InfraCredit and also a representative on the Board Credit Committee (with a consent rights over certain credit decisions), and monitoring rights and step-in rights (direct remediation) upon a drawing under the contingent capital facility. To a large extent, the rating accorded to InfraCredit is supported by the high investment grade ratings of InfraCredit’s sponsors and contingent capital providers. Specifically, GuarantCo has been accorded an international scale rating of ‘AA-’ by an internationally recognised rating agency, while other potential contingent capital providers are expected to have similar ratings from a recognised rating agency.

At the moment, InfraCredit is wholly owned by NSIA. The conceptualised ownership structure will have a mix of NSIA, international DFIs, and private institutional investors. Therefore, InfraCredit is currently finalising discussions with a potential investor, Africa Finance Corporation, a supranational financial institution. According to the Shareholders’ Agreement, the public sector’s stake in InfraCredit will be limited to a maximum of 25% once the new investors come on board. Despite InfraCredit’s self-regulated status, its governance structure conforms to international best practices.

The financial performance so far lags forecast and management has attributed a delay in its initial capitalisation. Overall, the company closed FY17 with a total comprehensive loss of N393.8m.

A negative rating action may follow downgrades in the ratings of any of the contingent capital providers, a rise in leverage beyond the indicated limit, underperformance of the financial projections, and/or evidence of management’s inability to fully implement the proposed business plan.

NATIONAL SCALE RATINGS HISTORY

Initial/ last rating (July 2017)
Long term: AAA(NG)
Rating outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst Committee Chairperson
Julius Adekeye Dave King
+23 41 904-9462-3 king@globalratings.net
adekeye@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Master Criteria for Rating Banks and Other Financial Institutions, updated March 2017
Glossary of Terms/Ratios (February 2016)

RATING LIMITATIONS AND DISCLAIMERS

ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT HTTP://GLOBALRATINGS.COM.NG.

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; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating is for a maximum of 12 months, or as indicated by the applicable credit rating document.

The rating was solicited by, or on behalf of Infrastructure Credit Guarantee Company Limited, and therefore, GCR has been compensated for the provision of the rating.

Infrastructure Credit Guarantee Company Limited participated in the rating process via face-to-face management meetings and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The credit rating above was disclosed to and contested by Infrastructure Credit Guarantee Company Limited and was amended following the provision of further material information by the entity.

The information received from Infrastructure Credit Guarantee Company Limited and other reliable third parties to accord the credit rating included the certificate of incorporation, business plan, information memorandum, capital structure, draft guarantee policy, draft investment policy, draft risk management policy, draft Shareholders’ Agreement, draft financial projections for 2017-2021, and the audited financial statements for the year ended 31 December 2017. In addition, other information specific to the rated entity and/or industry was also received.

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ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

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