Rating Release

Agusto & Co. affirms the “Aa” rating assigned to Lagos State Government’s ₦137.3 Billion Series IV 10-Year 13% Fixed Rate Bond Due 2031, with a stable outlook. 

The rating expires on 30 September 2027. 

Agusto & Co. hereby affirms the “Aa “rating assigned to the Lagos State Government’s (“Lagos State”, “LASG”, “the Issuer” or “the State”) ₦137.3 Billion Series IV 10-Year 13% Fixed Rate Bond Due 2031 (“Series IV”, “the Issue” or “the Bond”). The rating reflects the State’s robust capacity to service the Bond obligations, underpinned by monthly contributions of ₦1.38 billion from its internally generated revenue (IGR) and ₦1 billion from its share of centrally collected revenue (statutory allocation) pursuant to an Irrevocable Standing Payment Order (ISPO), both of which are paid into a dedicated Sinking Fund Account.

On 20 December 2021, LASG issued a ₦137.3 billion Series IV 10-Year 13% Fixed Rate Bond. The proceeds were used partly to repay a bridge facility that had been obtained to redeem three outstanding Bonds with higher coupon rates, with the remainder used to finance road construction projects across the State. The Bond carries a fixed coupon rate of 13%, payable semi-annually over its ten-year tenor. Following the expiration of a 24-month moratorium, principal repayment commenced in December 2023 and is being amortised on a half-yearly basis until maturity in December 2031. In addition, the Trust Deed provides Lagos State with the option to redeem all or part of the outstanding Bond from the fifth year after the issuance date, subject to giving bondholders at least 30 days’ notice. We do not expect the State to redeem the Bond before maturity, given that refinancing at prevailing market rates would likely increase its financing cost.