Rating Release
Agusto & Co. hereby assigns an indicative “Aa” rating to the Lagos State Infrastructure Sukuk SPV Plc’s up to ₦20 Billion Bond
The rating expires on 30 September 2023.
Agusto & Co. hereby assigns an indicative “Aa” rating to the Lagos State Infrastructure Sukuk SPV Plc’s (“Lagos Sukuk”, “the Issuer”, “SPV” or “the Company”) up to ₦20 Billion Seven-Year Fixed Return Forward-Ijarah Lease Sukuk Due 2029 (“Series II”, “Sukuk”, “the Issue” or Notes”) under the Lagos State Government’s ₦1 Trillion Debt and Hybrid Instruments Issuance Programme (“DAHI” or “the Programme”). The Issue rating is backed by the Lagos State Government’s1 (“LASG”, “Lagos State”, “the State” or “Originator”) unconditional and legally binding undertaking to service the Sukuk obligations jointly from the State’s Consolidated Debt Service Account (CDSA) and an Irrevocable Standing Payment Order (ISPO) on its share of statutory allocation. The CDSA is a dedicated internally segregated savings account established under the Lagos State Bonds Law 2008, for servicing all of the State’s public debt wherein a minimum of 15% of the Internally Generated Revenue (IGR) will be deposited monthly. The ISPO is a first-line charge on Lagos State’s share of centrally collected revenue to be approved by the Federal Ministry of Finance.
In 2022, Lagos State incorporated a special purpose vehicle (Lagos State Infrastructure Sukuk SPV Plc) to raise up to ₦20 billion Seven-Year Fixed Return Forward-Ijarah Lease Sukuk in December 2022 to finance the rehabilitation and upgrade of the Eleko Road section (3.57 kilometres) on the Eti Osa – Lekki Epe Expressway in Lagos State(Sukuk Asset) through a Sukuk financing structure. The Sukuk will attract lease rentals (rental payments and amortisedSukuk principal payments after 24 months moratorium) payable semi-annually in arrears for the State’s use of the Sukuk Asset. As a means of paying the Sukuk obligations and in line with the Declaration of Trust, the sum of ₦55.6 million will be transferred monthly from the CDSA for the first 24 months into a designated Sinking Fund Account (SFA) held by the Delegate Trustees and thereafter the sum shall be increased to ₦293 million monthly over the remaining tenor of the Sukuk. In addition, LASG has requested approval of an ISPO on its share of Statutory Allocation (SA) from the Federal Ministry of Finance (FMF) of ₦200 million monthly over seven years to fully meet the proposed Sukuk obligations of the SPV.
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.
