Lagos, 16 April, 2019 — Global Credit Ratings (“GCR”) has affirmed the final public long-term credit rating of AAA(NG)(sf) assigned to NSP-SPV Powercorp PLC’s (“NSP-SPV”, or “the Issuer”) N8.5bn Series 1 Guaranteed Green Infrastructure Bonds Issue (“the Bonds”); with the outlook accorded as Stable. The final rating accorded to the Series 1 Bonds issued by NSP-SPV under its N50bn Programme relates to timely payment of interest and principal, as such, the Programme is not rated; only the Series 1 Bonds are. The final rating will expire in October 2019.
RATING RATIONALE OF THE ISSUE
NSP-SPV was incorporated by North South Power Company Limited (“NSP”) as a special purpose vehicle to raise funds from the Nigerian capital market or other international markets by way of debt and other forms of capital, to finance various capital projects. In this regard, NSP-SPV registered a N50bn Bond Issuance Programme (“Programme”) with the Securities and Exchange Commission (“SEC”) in February 2019, and raised N8.5bn from the capital market under its Series 1 Guaranteed Bonds. The Programme is backed by a resolution of the Board of Directors, authorising the Issuer to issue the Bonds in series, and under different terms and conditions as may be deemed fit. The Series 1 Guaranteed Senior Fixed Rate Bonds constitutes direct, senior, unconditional and unsubordinated obligations of the Issuer. All payment obligations under the Issue (except otherwise provided for by applicable laws) rank equal with all other present or future unsubordinated payment obligations of both the Issuer and the Guarantor.
By virtue of the guarantee agreement entered into by InfraCredit and the Trustees (acting on behalf of the bondholders) in relation to the Series 1 Bonds, InfraCredit, in its capacity as Guarantor, irrevocably and unconditionally guarantees the punctual and full (100%) settlement of i) scheduled interest payment ii) scheduled principal payment, iii) and any interest accrued but unpaid. GCR affirmed InfraCredit’s long term national scale rating of AAA(NG) in July 2018.
The Guarantee shall serve as a continuing security, and will be in full force and effect until all payments under the Series 1 Bonds have been fully discharged, and cannot be accelerated, except, the Guarantor in its sole discretion elects to do so. Accordingly, upon the occurrence of an Event of Default, the Guarantor will continue to be liable to make interest and principal payments on the Series 1 Bonds on the due date in accordance with repayment schedule.
The ‘AAA(NG)(sf)‘ final, public, national scale long term credit rating accorded to the Series 1 Guaranteed Senior Fixed Rate Bonds is fully supported by the Guarantor’s credit rating, as the InfraCredit Guarantee offers timely and a 100% coverage of all payments due to the bondholders, under the Series 1 Bonds. In addition, GCR has received an executed legal opinion which confirms that the Guarantee is irrevocable, unconditional and enforceable in line with its terms. The Custodian has an equivalent short term national scale rating of A1+(NG) from an internationally recognised rating agency. A downgrade in the rating of the Guarantor and/or relevant risk presenting entities will affect the rating of the Series 1 Bonds, but not necessarily in the same quantum.
In accordance with the Series 1 Trust Deed, the net proceeds of the Series 1 Bonds will be passed through and/or advanced to NSP, thus making it the transaction Sponsor. In this regard, NSP as the Co-obligor shall have a joint and several obligation to repay the aggregate principal amount outstanding and coupon payable on the Series 1 Bonds. Accordingly, the primary source of repayment of the bond will be NSP’s operating cash flow.
NSP has established itself as a major private electricity supplier in Nigeria. Total generating capacity is 600 Megawatt (“MW”), while a number of projects in the pipeline could see generating capacity more than double over the medium term. NSP is also diversifying its energy sources, leveraging strong technical backing off its diverse shareholder base and an experienced management team. The upward growth trajectory was sustained in FY17, as revenue registered at a new high, largely underpinned by the full-year impact of contractual repricing. GCR upgraded the long term unsecured national scale rating of NSP to A-(NG) in October 2018.
GCR has accorded the final public rating based upon the receipt of satisfactory final, signed transaction documents.
NATIONAL SCALE RATINGS HISTORY
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APPLICABLE METHODOLOGIES AND RELATED RESEARCH
– Global Master Criteria for Rating Corporate Entities (February 2018)
– Global Structured Finance Rating Criteria (September 2018)
– North South Power Company Limited Rating Report (October 2018)
– Infrastructure Credit Guarantee Company Limited Rating Report (July 2018)
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 final rating will expire in October 2019.
The Issuer and the Arrangers 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 rating has been disclosed to the Issuer.
The ratings above were solicited by the Issuer of the Transaction, GCR has been compensated for the provision of the rating.
The information received from the Arrangers, Guarantor and other reliable third parties to accord the bond rating included: Programme Prospectus, Series 1 Pricing Supplement, NSP-SPV Powercorp PLC incorporation documents, Programme Trust Deed, Series 1 Trust Deed, Deed of Guarantee, Recourse Deed, Custody Agreement, Legal Opinions from Templars and Olaniwun Ajayi, and Litigation Opinion from Banwo & Ighodalo.