LASG’s N125bn bonds obtain an A + rating from GCR

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GCR Ratings has assigned an indicative long-term credit rating of A + (NG) (IR) to the Series IV Senior Unsecured Fixed Rate Bonds offered by the Lagos State Government.

The state government had recently obtained the approvals required to raise up to N125 billion in the Nigerian capital market, under the N500 billion bond program registered in 2016.

The proceeds are intended to be used to finance various socio-economic infrastructure projects and to refinance a portion of existing high-priced debt. The bonds are expected to have a term of 10 years.

Given the rationale for the ratings, GCR said, “Lagos State is a Category A state among state governments in Nigeria. The state is the most developed in Nigeria and remains the economic and commercial center of the country despite being the smallest state in terms of geographic size.

“GCR confirmed the rating of the issuer A + (NG) with a positive outlook in August 2021. The rating was supported by the robust internal economy of Lagos State, which contributed to sustained revenue growth generated internally, although the strength of the rating is offset by the substantial increase in indebtedness, which has a negative impact on its credit protection indicators.

“However, the existing government bonds were paid on time as they fell due. As a result, the long-term rating of Series IV bonds is equivalent to the senior unsecured long-term rating of the transmitter.

The rating company said the final rating would be conditional on the proper execution of the transaction documents in favor of the bondholders.

He said a change in the rating assigned to the issuer would have a direct impact on the rating of Series IV bonds.

GCR added, “The positive outlook reflects GCR’s expectations that Lagos State will continue to experience strong IGR growth, despite the setbacks caused by the COVID-19 pandemic.

“This confirms GCR’s expectations for an improvement in the financial profile over the forecast period if leverage does not increase further. “

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