Announcements Corporate Rating Alerts

GCR Downgrades C&I Leasing Plc’s Series 1 Bonds rating to BBB+(NG); Outlook Negative

Lagos Nigeria, 15 January 2021 — Global Credit Ratings has downgraded the national scale rating assigned to C&I Leasing Plc’s Series 1 Senior Secured Bonds from A-(NG) to BBB+(NG), with the outlook accorded as Negative. The rating is valid until October 2021.

RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit rating to C&I Leasing Plc’s Series 1 Senior Secured Bonds (“Series 1 Bonds”), under the N20bn Debt Issuance Programme based on the following key criteria:

C&I Leasing Plc (“the Issuer”) was authorised through a resolution of its Board of Directors, to issue fixed rate redeemable bonds by way of a book build. Accordingly, the Series 1 Bonds constitutes direct, senior, secured and unconditional obligations of the Issuer, and rank pari-passu without preference with other outstanding senior secured obligations of the Issuer (existing and future). The Series 1 Bond is an amortised bond with an initial issuance size of N7bn. However, outstanding balance as at December 2020 amounts to N4.8bn.

The Issuer is a strong brand in the equipment leasing and logistics sector in Nigeria, underpinned by its wide market coverage and entrenched experience. C&I’s national scale long term credit rating was recently affirmed at BBB(NG); with Negative Outlook by GCR.

The security pledged for the Series 1 Bonds is currently being combined as security for proposed Series 2 Bonds, such that the two bonds will rank pari passu. Accordingly, the rating of the Series 1 Bond has been adjusted to match that of the new series.

The rating of the Series 1 Bonds is derived by applying a notching approach, starting from the unsubordinated unsecured credit rating of the Issuer. The rating reflects the unsubordinated and secured nature of the Bonds, which will rank at par with all senior secured indebtedness of the Issuer. Accordingly, the Series 1 Bonds have been accorded a final national scale long-term rating of BBB+(NG), representing one notch higher than the unsubordinated unsecured credit rating of the Issuer, based on the estimated “Good Recovery Prospects” of the Security in an enforcement scenario, based on the recovery rate calculations on page 3 of this report.

A legal opinion from the solicitor to the Trustees of the Series 1 Bonds confirms that the security as reflected in the Security Deed is insolvency remote and will withstand an insolvency of the Issuer, the security granted to the Bondholders is not yet perfected, and that it shall upon it being duly perfected become legal, valid, binding and enforceable against third parties and any insolvency official.

According to the latest Trustees’ report as at November 2020, the Bonds have been performing in line with the covenants set by the Issuer so far.

While a positive movement in the rating of the Issuer could trigger a positive rating action, non-compliance with covenants, and/or a downgrade of the Issuer’s rating, would trigger a negative rating action.

NATIONAL SCALE RATINGS HISTORY

Initial rating (March 2018)

Long-term: A-(NG)

Rating outlook: Stable

Last rating (February 2020)

Long-term: A-(NG)

Rating outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst

Funmilayo Abdulrahman

Senior Analyst

funmilayo@gcrratings.com

Committee Chairperson

Dave King

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Criteria for Rating Corporate Finance and Leasing Companies, updated March 2017

Global Master Criteria for Rating Corporate Entities, updated February 2018

C&I rating report 2020

Glossary of Terms/Ratios, February 2017

RATING LIMITATIONS AND DISCLAIMERS

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://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATINGS-SCALES-DEFINITIONS. 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 AT WWW.GLOBALRATINGS.COM.NG

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

The ratings were solicited by, or on behalf of, C&I Leasing Plc, and therefore, GCR has been compensated for the provision of the ratings.

C&I Leasing Plc 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 ratings above were disclosed to C&I Leasing Plc.

The information received from C&I Leasing Plc to accord the credit rating included the C&I Leasing Plc’s 31 December 2019 audited annual financial statements (plus four years of comparative numbers), the unaudited management accounts of C&I Leasing Plc for 6 months up to June 2020, the Final Programme Trust Deed, the Final Series 1 Trust Deed, the Final Shelf Prospectus for the Programme, the final Series 1 pricing supplement, the Final Security Deed, the Certificate of Value of security assets, as well as the draft Underwriting Agreement.

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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.

CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.

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