|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|
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.
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.
|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|
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|
|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.