Rating Release

Agusto & Co. hereby assigns an indicative “Aa” rating to the Lagos State Government’s up to ₦14.815 Billion Series III Bond

The rating expires on 31 December 2023.

Agusto & Co. hereby assigns an indicative “Aa” rating to the Lagos State Government’s (“Lagos State”, “LASG”, “the Issuer” or “the State”) up to ₦14.815 Billion Series III: 5-Year Fixed Rate Green Bond Due 2027 (“Series III”, “the Issue” or “the Green Bond”) under the LASG’s ₦1 Trillion Debt and Hybrid Instruments Issuance Programme (“DAHI” or “the Programme”). The assigned Issue rating reflects our opinion on the high quality debt with low credit risk as well as the State’s strong capacity to service the Series III Bond obligations (coupon and principal) jointly from the Lagos State’s Consolidated Debt
Service Account (“CDSA”) funded from monthly internally generated revenue (IGR) remittances and the issuance of an Irrevocable Standing Payment Order (“ISPO”) to be approved by the Federal Ministry of Finance. The Issue is expected to obtain a Certification from the Climate Bonds Standards Certification Scheme demonstrating the Bond’s conformity with the International Capital Market Association’s (ICMA) Green Bond Principles (GBP) and alignment with the Paris Agreement on climate change.

Lagos State Government plans to issue up to ₦14.815 billion Series III Green Bond as part of an aggregate issuance of ₦134.8 billion under the DAHI in December 2022 to finance identified infrastructure green projects in the State. The proposed Series IIIcoupon will be determined through a book-building process and paid semi-annually over the five-year tenor of the Bond, while the principal will enjoy a moratorium of 24 months from the Issue date and subsequently be amortized half-yearly over the remaining three years. The Series III Green Bond obligations will be jointly serviced from monthly deductions from the Lagos State CDSA as well as the issuance of an ISPO to be approved by the Federal Ministry of Finance authorizing monthly deductions from the State’s share of statutory allocation into a designated sinking fund account (SFA) to be managed by the Bond Trustees for the benefit of the Bondholders. In line with the Trust Deed, the sum of ₦40.5 million will be transferred monthly from the CDSA from the date of issue for
the first 24 months into the SFA and thereafter ₦382.9 million monthly over the remaining 36 months. In addition, a monthly ISPO of ₦150 million, will be deducted from the State’s share of statutory allocation for 60 months into the SFA 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.