Announcements Corporate Rating Alerts

GCR upgrades the national scale long-term Issue rating of Axxela Funding 1 Plc’s N11.5bn Series 1 Bonds to A-(NG)(EL), Stable Outlook.

Lagos, 27 October 2021 – GCR Ratings (“GCR”) has upgraded the national scale long term Issue rating of Axxela Funding 1 Plc’s N11.5bn Series 1 Senior Secured Fixed Rate Bonds to A-(NG)(EL), with the Outlook accorded as Stable.

Rated Entity/Issue Rating class Rating scale Rating Outlook / Watch
N11.5bn Series 1 Senior Secured Bonds Long Term Issue National A-(NG)(EL)* Stable

*The Senior Secured Bonds rating is based on an estimate of the expected loss in the event of an issuer default and is a function of the estimated probability of default of the issuer and the potential losses that may be incurred. As such, this rating carries an “(EL)” suffix. The expected loss rating assigned to the Bonds issued therefore differs from the long-term senior unsecured credit rating of the Issuer.

Rating Rationale

The upgrade of the Axxela Funding 1 Plc’s N11.5bn Series 1 Senior Secured Bonds follows the recent upgrade of the national scale long-term corporate rating accorded to Axxela Limited (“the Sponsor”) to A-(NG). The upgrade reflects Axxela Limited’s established market position, which has enabled the group to report strong earnings and cash flows, thereby supporting comfortable credit protection metrics, despite ongoing expansion.

The Series 1 Bonds are direct, irrevocable and senior secured obligations of the Issuer, Axxela Funding 1 Plc, and shall at all times rank pari passu and without any preference among themselves. The Issuer is a special purpose vehicle owned and sponsored by Axxela Limited as a funding entity, solely for the purpose of raising funds for its Sponsor.

Pursuant to the Series 1 Trust Deed, security is primarily created over trade receivables due from take or pay contracts, held in trust under an existing Security Deed, in addition to the assets pledged by the Sponsor. However, the existing receivables are not to be sold off to any entity, neither will the receipts on future receivables be ring-fenced for the payment of the bond obligations. As such, GCR considers the trade receivables as part of the working capital available for day-to-day operations of the Obligors, which have been factored into the long-term corporate ratings accorded to the Sponsor. Thus, recoveries would be in line with the corporate recovery prospects in a default scenario. Accordingly, the long-term Issue rating of the Series 1 Bonds is equalised to the Sponsor’s long term senior unsecured corporate rating.

Outlook Statement

The Stable Outlook reflects GCR’s opinion that Axxela will continue to generate robust earnings and cash flow, which will continue to support comfortable gearing metrics, a strong capital structure and adequate liquidity, even if the substantial capex continues.

Rating Triggers

Given that the rating is intrinsically linked to the Sponsor’s long-term corporate rating, any change in the rating assigned to the Sponsor will directly affect the Bond rating.

Analytical Contacts

Primary analyst Busola Akinrolabu Analyst
Lagos, Nigeria Busola@GCRratings.com +234 1 904 9462
Committee chair Eyal Shevel Sector Head: Corporate Ratings
Johannesburg, ZA Shevel@GCRratings.com +27 11 784 1771

Related Criteria and Research

Criteria for the GCR Ratings Framework, May 2019
Criteria for Rating Corporate Entities, May 2019
Criteria for Secured Bond Expected Loss Credit Ratings, July 2021
GCR Ratings Scales, Symbols & Definitions, May 2019
GCR Nigeria Country Risk Scores, October 2021
GCR Nigeria Corporate Sector Risk Scores, August 2021

Ratings History

Axxela Funding 1 Plc’s N11.5bn Series 1 Bonds

Rating class Review Rating scale Rating class Outlook Date
Long term Issue Initial/Last National BBB+(NG) Stable December 2020

Glossary

Credit Risk The possibility that a bond issuer or any other borrowers (including debtors/creditors) will default and fail to pay the principal and interest when due.
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 Ratings See GCR Rating Scales, Symbols and Definitions.
Issuer The party indebted or the person making repayments for its borrowings.
Leverage With regard to 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.
Maturity The length of time between the issue of a bond or other security and the date on which it becomes payable in full.
Rating Horizon The rating outlook period
Rating Outlook See GCR Rating Scales, Symbols and Definitions.
Refinancing The issue of new debt to replace maturing debt. New debt may be provided by existing or new lenders, with a new set of terms in place.
Short Term Rating 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 rating has been disclosed to Axxela Limited. The rating above was solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the rating.

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

  • Shelf Prospectus
  • Programme Trust Deed
  • Series 1 Pricing Supplement
  • Series 1 Trust Deed
  • Legal Opinion from Olaniwun Ajayi LP
  • Master Notes Subscription Agreement
  • Gaslink Security Deed
  • Axxela All Assets Debenture
  • Trustees Bond Performance Report as at October 2021


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