Lagos Nigeria, 3 October 2019 — Global Credit Ratings (“GCR”) has affirmed the ratings of ‘AA+(NG)’ and ‘AA+(NG)’ accorded to Mixta Real Estate Plc’s N4.5bn Series 1 Guaranteed Bonds and N2.961bn Series 2 Tranche A Guaranteed Bonds, respectively. Concurrently, GCR has downgraded the rating accorded to the N2.32bn Series 2 Tranche B Secured Bonds to A-(NG), with the Outlook accorded as Stable. The ratings expire in July 2020.
The rating accorded to each Series relates to ultimate payment of interest and principal (as opposed to timely, akin to an expected loss rating, which is a function of probability of default and loss severity).
GCR has accorded the above credit ratings to Mixta Real Estate Plc’s (the “Issuer”) Series 1 Bonds and 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. GCR downgraded the Issuer’s long-term rating to ‘BBB-(NG)’ in August 2019, with a Stable Outlook. The downgrade reflects Mixta Nigeria’s inability to scale up project delivery amidst a high debt profile.
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 relating to the Series 1 Bonds, and Series 2 Tranche A Bonds, and subject to the maximum guaranteed amounts. 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.
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.
GCR has reviewed the Trustees report in respect of the Series 1 Bonds, and noted that the funding of the Payment Account was slightly delayed during the payment cycle of July 17, 2019. The Payment Account was fully funded 2 days before due date as opposed to 5 days due date stated in the Series 1 Bonds Trust Deed.
The ratings of the Series 1 Bonds and Series 2 Tranche A Bonds are supported by 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.
As the rating of Series 2 Tranche B Bonds is intrinsically linked to the financial performance of the Issuer, the rating was downgraded by a notch to A-(NG) following a similar downgrade of the Issuer’s long term corporate credit rating.
A downgrade in the rating of the Issuer and/or Guarantor; and an adverse change in recovery prospects could trigger a negative rating action.
NATIONAL SCALE RATINGS HISTORY
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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, 2016-19,
Glossary of terms/ratios, February 2018.
RATING LIMITATIONS AND DISCLAIMERS
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 Bond ratings expire in July 2020.
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:
Shelf Prospectus, Pricing Supplements, Deed of Guarantee, Deed of Third Party Legal Mortgage, Recourse Agreement, Programme Trust Deed, Series Trust Deeds, Legal Opinions, Joint Trustees Report and other information specific to the Issuer.
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.