Rating Release

Agusto & Co. hereby assigns “Aa“ rating to the Lagos State Government’s ₦137.3 Billion Bond

The rating expires on 30 September 2023.

Agusto & Co. hereby assigns a “Aa“ rating to the Lagos State Government’s (“Lagos State”, “LASG”, “the Issuer” of “the State”) ₦137.3 Billion Series IV 10-Year 13% Fixed Rate Bond Due 2031 (“Series IV”, “the Issue” or “the Bond”). The assigned Issue rating reflects our opinion on the State’s very strong capacity to service the Bond obligations (coupon and principal) jointly from the Lagos State’s Consolidated Debt Service Account (“CDSA”) through monthly internally generated revenue periodic contributions as well as the continued monthly irrevocable standing payment order (ISPO) remittance of ₦1 billion from the State’s share of statutory allocation into a designated sinking fund account (SFA) to meet the Bond obligations as and when due.

In December 2021, Lagos State issued a ₦137.3 billion Series IV Bond to refinance a Bridge Facility (used to redeem three erstwhile bonds with higher coupon rates) and fund critical road infrastructure projects in the State. The Series IV Bond coupon is being repaid semi-annually over the ten-year tenor of the Bond, while the principal will enjoy a moratorium of 24 months from the Issue date and subsequently be amortized bi-annually over the remaining eight years. Furthermore, Lagos State reserves the sole discretion (in line with the Trust Deed) to redeem all or part of the outstanding bond, after 5 years from the issue date provided not less than 30 days’ notice is given to the bondholders. To meet the Bond obligations, the sum of ₦528.1 million is being transferred monthly from the CDSA from the date of issue for 24 months into the SFA and thereafter, this shall increase to ₦1.38 billion monthly over the remaining tenor. In addition, a monthly ISPO of ₦1 billion will be transferred from the State’s share of statutory allocation as a first-line charge into the SFA over 120 months to meet the Bond obligations as and when due.

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.