Rating Release

Agusto & Co. hereby affirms the “S3sf” rating assigned to AFIL SPV Plc’s ₦100 Billion Commercial Paper 

The rating expires on 31 December 2023.

Agusto & Co. hereby affirms the “S3sf” rating assigned to AFIL SPV Plc’s (“AFIL”, “the Issuer” or “SPV”) ₦100 Billion Asset-Backed Commercial Paper (ABCP) Issuance Programme. Under the ABCP Programme, the SPV has issued 10 tranches (Tranches A – H, J & K) totalling ₦27.9 billion under the Series 1 issuance as conventional or Shari’ah Notes either as a single tranche, re-opening of existing tranches or in multiple tranches of not more than 270 days. Our rating affirmation reflects i) the partial corporate guarantee provided by AFEX Commodities Exchange Limited (“AFEX”, the Sponsor”, the Guarantor”, “the Collateral Manager” or “the Company”) and AFEX Investment Limited (co-guarantor) to cover up to 50% of the principal outstanding and accrued interest in the unlikely event of a default by an Obligor (commodity buyers or processors) in meeting the Financing Agreement repayments obligations, and ii) the satisfactory recovery prospects of the 100% pledged commodities in a stressed position. Furthermore, Agusto & Co. notes positively that all the 10 commercial paper issuances under the Series 1 ABCP have been fully repaid as of 31 December 2022, evidencing a good track record. Nonetheless, we remain concerned about the absence of external liquidity support to fund the commodities exposure in a stressed scenario given the extreme liquidity requirements of ABCP Programmes.

AFIL SPV Plc intends to issue up to ₦30 billion in six tranches (Tranches A – F) as part of a Series 2 Issuance as conventional or Shari’ah Notes either as a single tranche or in multiple tranches of not more than 270 days under the ABCP Issuance Programme in line with the existing transaction structure. Agusto & Co. notes that the Series 1 & 2 CP issuances are within the ABCP Programme limit of ₦100 billion and as such the credit considerations remain valid. The proceeds of the conventional CP Notes to be issued under the Series 2 ABCP Programme shall be domiciled with the Custodian. Processors will purchase commodities and deliver same to the Collateral Manager at an accredited AFEX warehouse, wherein the Collateral Manager will issue electronic warehouse receipts (e-WR) for the stored commodities which shall be pledged to AFIL or Custodian. Furthermore, the Custodian will disburse the cash equivalent of the pledged commodities to the obligors. Under the Shari’ah-compliant Murabaha Notes structure, the Issuer will purchase the commodities on request from the processors (and deposit with the Collateral Manager at designated warehouses) and resell them to the Processors at an agreed price consisting of the purchase price and markup. In line with the existing ABCP Programme structure, the Co-guarantors will irrevocably and unconditionally guarantee up to 50% of each conventional CP Note and up to 50% of the payment obligation of the Processors under the Murabaha facility agreement in line with the terms of the executed Deed of Guarantee.

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.