Rating Release

Agusto & Co. affirms the “Bbb+” rating assigned to Kogi State Government’s ₦3 Billion Bond

The rating expires on 30 September 2023.

Agusto & Co. affirms the “Bbb+” rating assigned to Kogi State Government’s ₦3 Billion 17% Fixed Rate Infrastructure Development Series 2 Bond (“the Issue” or “the Bond”) Due in 2025. The rating affirmation underlines the continuous fulfilment of the Irrevocable Standing Payment Order (ISPO) authorising the monthly deduction of ₦47 million from the Kogi State Government’s (“Kogi State”, “KOSG” or “the Issuer”) share of centrally collected revenue (statutory allocation) into a dedicated Sinking Fund Account (SFA) towards meeting the Series 2 Bond obligations.

The Series 2 Bond, which was originally issued in March 2015, attracted a 17% fixed coupon rate payable on the twenty-eighth day of March and September every year over its tenor, while the Bond principal was supposed to be redeemed in a lump sum at maturity in 2022. Based on the consent of the Bondholders and approval from the Securities and Exchange Commission (SEC), the Bond was restructured in 2017. The key terms of the restructuring included extending the Issue’s tenor by another three years to 2025 and changing the principal repayment structure from a bullet to amortising. Kogi State has continually met the Series 2 Bond obligations (coupon & principal) on the back of the uninterrupted monthly ISPO inflows. Based on the Trustees’ Report as at 30 September 2022 (Q3’2022), ISPO inflows into the SFA were more than sufficient to meet the Series 2 Bond obligations (coupon and principal) and other bond-related expenses, leaving a credit balance of ₦1.51 billion after refund of excess ISPO to the State. We estimate that the balance in the SFA together with future ISPO inflows will be sufficient to cover the outstanding Note obligations 1.6 times, which we consider satisfactory.

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.