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.
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)
Rating outlook: Stable
Last rating (February 2020)
Rating outlook: Stable
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
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.