Rating Release
Agusto & Co. affirms the “Bbb+” rating assigned to the Bauchi State Government’s ₦10.4 Billion Bond
The rating expires on 30 September 2023.
Agusto & Co. affirms the “Bbb+” rating assigned to the Bauchi State Government’s (“Bauchi”, “the State” or “the Issuer”) ₦10.4 billion 16.5% Fixed Rate Series 1 Bond 2026 (“the Bond” or “the Issue”). The rating affirmation is supported by the continuous fulfilment of the Irrevocable Standing Payment Order (ISPO) authorising monthly deductions of appropriate amounts from the State’s statutory allocation into a designated sinking fund account (SFA) towards meeting coupon and principal obligations.
In October 2016, the Bauchi State’s Executive Council approved the restructuring of the ₦15 billion Seven-Year 15.5% Fixed Rate Bond by extending the tenor of the outstanding principal (which stood at ₦10.4 billion) for an additional five years – with the new maturity date now December 2026. Furthermore, the coupon rate was increased by 100 basis points to 16.5% as compensation to the Bondholders. Based on the new structure, the revised coupon rate of 16.5% is payable on the sixth day of June and December every year alongside the amortised principal amount. In addition, the monthly ISPO deductions instituted in favour of the Series 1Bondholders were reduced to ₦201.26 million (previously ₦305.67 million) in line with the new structure of the Bond. Based on the Joint Trustees’ Report as at 30 September 2022 (Q3’2022), the total ISPO contributions into the SFA plus earned investment incomes (since the issuance of the Bond in 2014) stood at ₦23.03 billion. This was sufficient to cover total Bond obligations of ₦20.92 billion (comprising coupon & principal) to Bondholders and settlement of other bond-related expenses of ₦0.83 billion, thus leaving a balance of ₦1.27 billion as at the same date.
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.