Rating Release

Agusto & Co. hereby assigns “Aa“ rating to the Lagos State Government’s ₦100 Billion Bond

The rating expires on 30 September 2023.

Agusto & Co. hereby assigns “Aa“ rating to the Lagos State Government’s (“the Issuer”, “LASG”, “Lagos” or “the State”) ₦100 billion 12.25% Ten-Year Fixed Rate Series III Bond Due 2030 (“the Issue” or “the Bond”). The assigned rating reflects our opinion on the Issuer’s strong capacity to service the Series III Bond obligations (coupon and principal) jointly from the Lagos State’s Consolidated Debt Service Account (“CDSA”) through internally generated revenue (IGR) receipts as well as monthly Irrevocable Standing Payment Order (“ISPO”) deduction from the State’s share of statutory allocation into a designated sinking fund account (SFA) to meet the Bond obligations as and when due.

The Series III Bond which was issued in January 2020 has a fixed coupon rate of 12.25% is being paid semi-annually until maturity of the Bond in January 2030, while the principal is being amortised half-yearly following the expiration of a 24-month moratorium in January 2022. Furthermore, the Series III Bond has an embedded call option which is exercisable by LASG after five years from the issue date (on any payment date) subject to obtaining regulatory approvals and issuance of 30 days’ notice to the Bondholders. Agusto & Co. notes that the bond obligations are expected to be serviced from monthly inflows into the SFA. The Trust Deed provides for the SFA to be funded with the sum of ₦50.8 million monthly from LASG’s IGR for 24 months and thereafter ₦694.4 million monthly over the remaining 96 months. Also, the SFA will be funded with an ISPO deduction of ₦1 billion monthly over the Bond tenor.

The opinions expressed in this rating release do not represent investment or other advice and should therefore not be construed as such. Visit www.agusto.com for further information.