GCR downgrades Municipality Waste Management Contractors Limited’s Series 1 Notes rating to DD(NG)
Lagos Nigeria, 14 March 2019 — Global Credit Ratings (“GCR”) has downgraded the Municipality Waste Management Contractors Limited’s (“MWMCL”) Series 1 Notes rating to DD(NG) from A(NG).
The rating accorded to the Notes in September 2018 was linked to that of the Lagos State Government (“LASG”), premised on the Irrevocable Standing Payment Order (“ISPO”) issued by the State, in addition to a Resolution of the State Executive Council which obligates LASG to pay all outstanding liabilities in the event of termination of contract. However, the Notes are now in default as LASG has missed payment into the sinking fund accounts, from which the debt service obligations under the Notes Issuance are to be serviced. Relevant documents used to accord the initial rating include:
– LASG’s EXCO resolution in connection with the Notes
– LASG’s ISPO
– Service Contract executed between LASG and Visionscape
– The Programme Trust Deed
– The Supplementary Trust Deed
– Legal Opinion from the solicitors to the Trustees, which stated that all transaction documents were valid and binding
– Programme Information memorandum
– Supplemental information memorandum.
GCR has engaged with LASG (the ISPO provider), who has confirmed that the payment standstill is not as a result of its inability to pay, given the strength of LASG treasury, but rather the inability to secure requisite approval of the State House of Assembly to service obligations under the Notes. This negatively impacts GCR’s opinion of both the likelihood of the timely servicing of obligations and the ultimate payment of principal.
GCR will continue to monitor developments, and will review the rating once the issues surrounding the ISPO are resolved and outstanding obligations are fully settled.
NATIONAL SCALE RATINGS HISTORY
N20.3bn Series 1 Tranche A Note: A(NG) (October, 2017)
N4.85bn Series 1 Tranche B Note: A(NG)(February 2018)
N3.3bn Series 1 Tranche C Note: A(NG)(February 2018)
Rating outlook: Stable
N28.47bn Series 1 (Tranche A-C) Notes: A(NG) (September, 2018)
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),
Glossary of terms/ratios, February 2018.
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