Announcements Corporate Rating Alerts

GCR downgrades the long term Issuer rating of BBB+(NG) assigned to the G.O.S Management Company Limited N8.4bn Medium Term Notes, Stable Outlook.

Lagos, Nigeria, 04 May 2021 – GCR Ratings (“GCR”) has downgraded G.O.S Management Company Limited N8.4bn medium term notes long term issue rating to BBB+(NG).

Rated Entity / Issue Rating class Rating scale Rating Outlook/Watch
G.O.S Management Company Limited N8.4bn Medium Term Notes Long Term Issue National BBB+(NG) Stable

Rating Rationale

Gombe State Government of Nigeria’s (“Gombe State” or “the State”) revenue generation efforts have yielded few tangible results over the years due to the poor management of its revenue generating assets, with the reliance on external support persisting. In a bid to optimise revenue generation and ensure accountability, Gombe State established a framework for the transfer of selected state-owned revenue generating assets to a special purpose vehicle (“SPV”), G.O.S Management Company Limited to develop, manage and control the assets. To finance the development and management of the assets, G.O.S Management Company Limited raised funds from the Nigerian capital market by way of N8.4bn Medium Term Notes in March 2020. GCR affirmed the national scale long term Issuer rating of BB+(NG) accorded to Gombe State in April 2021.

The Notes benefits from an ISPO approved and issued by the Department of Home Finance under the Office of the Federal Ministry of Finance as a first line charge upon and payable out of the statutory allocation of Gombe State. The ISPO provides for servicing coupon and principal payments on the Notes up to and including maturity, in the event of default or shortfall in cash flow from the transferred assets. A three-notch uplift has been applied for the Notes, starting from the national scale long term Issuer rating of the State. Accordingly, a national scale long term Issue rating of BBB+(NG) has been assigned to the Notes.

Outlook Statement

The Stable Outlook reflects GCR’s view that Gombe State will continue to enjoy strong financial support from the federal government of Nigeria.

Rating Triggers

Given that the Notes rating is linked to the State’s long-term rating, any change in the rating assigned to the State will directly affect the Notes ratings. Any perceived deterioration in the funding security offered by the ISPO could also impact the rating on the Notes.

Analytical Contacts

Primary analyst Idris Oyekan Analyst: Corporate Ratings
Lagos, Nigeria Idris@GCRratings.com +234 1 9049462
Secondary Analyst Eyal Shevel Sector Head: Corporate and Public Sector
Johannesburg, ZA Shevel@GCRratings.com +27 11 784 1771
Committee chair Matthew Pirnie Group Head of Ratings
Johannesburg, ZA Matthewp@GCRratings.com +27 11 784 1771

Related Criteria and Research

Criteria for the GCR Ratings Framework, May 2019
Criteria for Rating Local and Regional Governments, June 2019
GCR Ratings Scales, Symbols & Definitions, May 2019
GCR Nigeria Country Risk Scores, February 2021
Gombe State rating report April 2020

Ratings History

G.O.S Management Company Limited N8.4bn medium term notes

Rating class Review Rating scale Rating Outlook/Watch Date
Long Term Issue Initial National A-(NG) Negative Watch July 2020
Last National A-(NG) July 2020

Glossary

Cash Flow The inflow and outflow of cash and cash equivalents. Such flows arise from operating, investing and financing activities.
Cash Funds that can be readily spent or used to meet current obligations.
Coverage The scope of the protection provided under a contract of insurance.
Debt An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a commitment to repay the principal in full on a specified date or over a specified period.
Issuer The party indebted or the person making repayments for its borrowings.
Leverage Regarding corporate analysis, leverage (or gearing) refers to the extent to which a company is funded by debt.
Liquidity The speed at which assets can be converted to cash. It can also refer to the ability of a company to service its debt obligations due to the presence of liquid assets such as cash and its equivalents. Market liquidity refers to the ease with which a security can be bought or sold quickly and in large volumes without substantially affecting the market price.
Long Term Rating See GCR Rating Scales, Symbols and Definitions.
Market An assessment of the property value, with the value being compared to similar properties in the area.
Rating Outlook See GCR Rating Scales, Symbols and Definitions.

SALIENT POINTS OF ACCORDED RATINGS

GCR affirms that a.) no part of the ratings 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; and c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security, or financial instrument.

The credit ratings have been disclosed to Gombe State Government and the Issuer. The ratings above were solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the ratings.

Gombe State Government participated in the rating process via written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The information received from Gombe State Government and other reliable third parties to accord the credit ratings included:

  • The audited financial results for the year ended 31 December 2019.
  • Six-month management account up to 30 June 2020
  • Four years of comparative audited numbers.
  • Approved revised budget for 2020.
  • Debt facility details as of June 2020.
image_pdf


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.

Copyright © 2021 GCR INFORMATION PUBLISHED BY GCR MAY NOT BE COPIED OR OTHERWISE REPRODUCED OR DISCLOSED, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT GCR’S PRIOR WRITTEN CONSENT. Credit ratings are solicited by, or on behalf of, the issuer of the instrument in respect of which the rating is issued, and GCR is compensated for the provision of these ratings. Information sources used to prepare the ratings are set out in each credit rating report and/or rating notification and include the following: parties involved in the ratings and public information. All information used to prepare the ratings is obtained by GCR from sources reasonably believed by it to be accurate and reliable. Although GCR will at all times use its best efforts and practices to ensure that the information it relies on is accurate at the time, GCR does not provide any warranty in respect of, nor is it otherwise responsible for, the accurateness of such information.GCR adopts all reasonable measures to ensure that the information it uses in assigning a credit rating is of sufficient quality and that such information is obtained from sources that GCR, acting reasonably, considers to be reliable, including, when appropriate, independent third-party sources. However, GCR cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall GCR have any liability to any person or entity for (a) any loss or damage suffered by such person or entity caused by, resulting from, or relating to, any error made by GCR, whether negligently (including gross negligence) or otherwise, or other circumstance or contingency outside the control of GCR or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits) suffered by such person or entity, as a result of the use of or inability to use any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained in each credit rating report and/or rating notification are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained in each credit rating report and/or rating notification must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY GCR IN ANY FORM OR MANNER WHATSOEVER.