Lagos, 14 September 2018 — Global Credit Ratings has affirmed the final public long term rating of ‘AA+(NG) to the Series 1 Senior Guaranteed Fixed Rate Bonds (“Bonds” or “Series 1 Bonds”) issued by Mixta Real Estate Plc (“Mixta Nigeria” or “the Issuer”), under the Issuer’s N30bn Medium Term Note Programme (“MTNP” or the “Programme”); with the Outlook accorded as Stable.
The total issuance of Series 1 Bonds amounted to N4.5bn, with a final maturity of 16 January 2022. The transaction structure incorporates a two-year moratorium and principal repayment will be made on an amortising basis following expiration of the moratorium. The final public rating accorded to the Series 1 Bonds relates to ultimate payment of interest and principal (as opposed to timely, akin to a loss severity rating thereof). The rating will expire in August 2019.
The rating excludes an assessment of the ability of the Issuer to pay any (early repayment) penalties.
Global Credit Ratings (“GCR”) has accorded the above credit ratings to the Issuer’s Series 1 Bonds based on the following key criteria:
Mixta Nigeria 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 and subsequently raised N4.5bn from the capital market under its Series 1 Bond Issue, at a fixed annual interest rate of 17%, in January 2017. The Series 1 Bonds have a five year tenor, with the legal maturity date being 16 January 2022. The Series 1 Senior Guaranteed Fixed Rate 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 (dated 17 January 2017) pursuant to which GuarantCo, in its capacity as Guarantor, irrevocably and unconditionally guarantees the punctual payment of i) 100% of the Principal Amount related to the Bonds and ii) one semi-annual interest payment on the Bonds, both subject to a maximum payment of N4,882.5m. Under the Guarantee, payments will 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 under the Series 1 Bonds have been fully discharged. All payment obligations under the Issue (except otherwise provided for by applicable laws) rank equal with all other present or future unsubordinated indebtedness and monetary obligations of both the Issuer and GuarantCo (“the Guarantor”).
GuarantCo is rated ‘AA-’ and ‘A1’ on a long term basis respectively, by two internationally recognised rating agencies. GCR is of the view that the credit quality of GuarantCo is commensurate with a ‘AAA(NG)’ long-term national scale rating.
GCR reviewed the Joint Trustees’ performance reports and notes that the Issuer has made three coupon payments (totaling N1.1bn) on the respective due dates, in line with transaction documentation. Principal repayment will commence in July 2019, following expiration of the two-year moratorium. There has been no change to the structure of the transaction. The Trustees did not report any breach to transaction terms.
The rating of the Series 1 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. A downgrade in the rating of the Guarantor and/or relevant risk presenting entities and/or revision in the terms of the Guarantee may affect the rating of Series 1 Bonds.
NATIONAL SCALE RATINGS HISTORY
Senior Credit Analyst
+234 (1) 904-9462-3
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
• Global Master Criteria for Rating Corporate Entities (February 2018);
• Global Master Structured Finance Rating Criteria (September 2018);
• Global Summary Structurally Enhanced Corporate Bonds Rating Criteria (November 2017);
• Mixta Real Estate Plc Issuer Rating Reports 2016-18.
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 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 rating will expire in August 2019.
Mixta Real Estate Plc 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 Bond rating has been disclosed to Mixta Real Estate Plc with no contestation of the rating.
The information received from the Issuer and the Joint Trustees to accord the Bond rating included:
Trustees’ performance reports up to 1 August 2018, Programme Prospectus, Series 1 Pricing Supplement, Programme Trust Deed, Series 1 Trust Deed, Deed of Guarantee, Side letter to the Deed of Guarantee, Deed of Recourse, Legal Opinion from Udo Udoma & Belo-Osagie, and Legal Opinion from Trinity International 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.