Global Credit Rates C&I Leasing N7b Series 1 Bonds

By Dipo Olowookere

Nigeria-based rating agency, Global Credit Ratings (GCR), has accorded an indicative, public national scale long term rating of A-(NG) to C&I Leasing Plc N7 billion Series 1 Bonds being issued under C&I Leasing Plc N20 billion Debt Issuance Programme with a Stable Outlook.

In a statement issued by GCR last Tuesday, the rating was assigned to the notes because C&I Leasing recorded an improved performance based on unaudited management accounts for the year ending December 31, 2017.

The firm grew its revenue during the period by 42.8 percent y/y to N22.5 billion, supported by the commencement of key boats and vessels lease contracts.

This is expected to support sound volume traction for the group over the rating horizon, with note taken of the more predictable income flows inherent in the medium term contracts.

Overall, C&I Leasing recorded a review period high pre-tax profit of N1.1 billion for FY17, improving from N921 million in FY16.

GCR explained that the indicative rating of the Series 1 Bonds is derived by applying a notching approach, starting from the unsubordinated unsecured credit rating of the issuer.

The accorded indicative rating reflects the unsubordinated and secured nature of the Bonds to be issued, which will rank at par with all senior secured indebtedness of the Issuer.

Accordingly, the Series 1 Bonds have been accorded an indicative, public national scale long-term rating of A-(NG), two notches 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 shown in the credit rating report, the statement said.

It added that a legal opinion from the solicitor to the Trustees of the Series 1 Bonds confirmed 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.

GCR warned that positive movement in the rating of the Issuer could trigger a positive rating action and on the other hand, a significant change in the final transaction structure, non-compliance with covenants, and/or a downgrade of the Issuer’s rating, would trigger a negative rating action.