Thursday, March 17, 2022 / 09:48 AM / by GCR Ratings / Header Image Credit: iStock 

GCR Ratings has assigned a national scale long term indicative Issue rating of AAA_(NG)(IR) to LFZC Funding SPV Plc's N25bn Series 2 Senior Guaranteed Fixed Rate Infrastructure Bonds ("Series 2 Bonds"), with the Outlook accorded as Stable. The indicative rating will expire on the sooner of 30 June 2022 or the issuance date of the Bonds.

*IR stands for indicative rating.

Rating Rationale

LFZC Funding SPV Plc's N25bn Series 2 Bonds are the second series to be issued under the N50bn Bond Issuance Programme ("BIP") registered with the Securities and Exchange Commission in August 2021. The Issuer is authorised by virtue of a resolution of its board of directors dated 1 June 2021 to issue bonds not exceeding the maximum value of the programme.

The Issuer is a special purpose vehicle set-up solely for the purpose of raising finance for Lagos Free Zone Company ("the Sponsor" or "Co-Obligor"). The Sponsor engages in the development and management of Lagos Free Zone and leasing of the developed land to enterprises registered within the Zone. Its ultimate parent company is Tolaram Group Inc., a global conglomerate founded in 1948 and headquartered in Singapore, with operations spanning across Europe, Asia, and Africa.

The Series 2 Bonds shall constitute direct, unconditional, guaranteed, and unsubordinated obligations of the Issuer / Sponsor and Guarantor. The Bonds have a tenor of 20 years, interest paymeth after the Issue date until maturity. The Series 2 Bonds will be fully guaranteed by Infrastructure Credit Guarantee Company Limited ("InfraCredit" or "the Guarantor").

InfraCredit has agreed to provide an irrevocable and unconditional guarantee in favour of the Guarantee Trustee for and on behalf of the Series 2 Bondholders to guarantee the timely performance of the obligations of the Issuer under the Series 2 Bonds Issue. The payment obligations of the Issuer, Co-Obligor and Guarantor in respect of the Series 2 Bonds, shall rank at par with other indebtedness of similar status to the Issuer, the Co-Obligor, and the Guarantor respectively.

InfraCredit in its capacity as Guarantor, shall guarantee the timely payment of both the interest and principal obligations of the Series 2 Bonds. Under the Guarantee, if by ten (10) business days prior to a payment date, the payment account has not been funded by the Issuer and/or the Co-Obligor, the Guarantee Trustee is required to issue a Demand Notice to the Guarantor, and InfraCredit is required to fund the payment account with the due amount by the payment date to ensure bondholders are paid. The Guarantee will be in force until all payment obligations under the Series 2 Bonds have been fully discharged. InfraCredit is rated 'AAA_(NG)' with a Stable Outlook. The rating is underpinned by the uniqueness of InfraCredit's operations as a credit guarantee provider, its strong capitalisation, liquidity, and asset quality position, albeit counterbalanced by its self-regulated status.

Given that InfraCredit offers timely and full coverage of all payments due under the Series 2 Bonds through the Deed of Guarantee, the Bonds bear the same credit risk as InfraCredit. As such, the national scale long-term indicative Issue rating of the Series 2 Bonds is equalised with the Guarantor's national scale long-term Issuer rating.

Outlook Statement

The Stable Outlook reflects that of the Guarantor's national scale long term Issuer rating.

nt shall accrue from allotment date to be paid semi-annually, while principal repayments have a moratorium of 60 months, semi-annually each year commencing from the 66th mon

Rating Triggers

A change in the national scale long term Issuer rating of the Guarantor and/or revision in the terms of the Deed of Guarantee would impact the rating of the Series 2 Bonds.

Rating History

Salient Points of Accorded Rating

GCR affirms that a.) no part of the rating process was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; and c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument.

The credit rating has been disclosed to the Issuer and the Transaction Arrangers. 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.

The Issuer and the Transaction Arrangers participated in the rating process via tele-conferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The information received from the Issuer and other reliable third parties to accord the credit rating included: