GCR Affirms InfraCredit Topnotch Rating with Stable Outlook
GCR Ratings has affirmed Infrastructure Credit Guarantee Company Limited’s (InfraCredit) national scale long-term issuer rating of AAA (NG), with a stable outlook, according to its official rating note released yesterday.
The emerging market rating agency said the affirmation reflects Infrastructure Credit Guarantee Company Limited’s strategic role as an infrastructure credit guarantee provider in Nigeria, with a “complete not compete” competitive business nature.
According to the rating note, InfraCredit has a stable funding structure which comprises equity, preference shares and long-term subordinated borrowings from international development finance institutions (DFIs).
As of 31 March 2024, InfraCredit’s funding base registered at N221.5 billion up from N161.0 billion as of 31 December 2023, according to GCR with further growth expected through planned equity capital and subordinated loans from more DFIs in the near term.
The rating note stated that InfraCredit has maintained a robust liquidity profile, with a considerable 79.3% of total assets held in near cash and FGN investment securities as of 31 March 2024.
The company’s liquidity is also supported by non-accelerated payment of guarantee in the event of a default, given that the payable amount is limited to the sum due on the transaction at the time of default, and not the total guaranteed amount, said GCR.
The rating recognises InfraCredit’s strong capital and leverage position, sound risk profile and robust funding and liquidity.
“InfraCredit’s developmental impact through the provision of credit enhancement to support the credit quality of loans and local currency debt instruments (mainly bonds) issued by corporate entities to finance eligible long-term infrastructure projects in Nigeria, is a competitive strength.
“The company has progressed well with its mandate delivery, evidenced by the sustained growth in outstanding guaranteed portfolio to N203 billion or USD152.6 million as of 31 March 2024 from N191.8 billion or USD213.3 million in 2023, and N120 billion or USD267.5 million in 2022, spread across prioritised and eligible sectors.
“Looking ahead, we expect sustained business scaling given a pipeline of guaranteed transactions estimated at NGN627.6 billion or USD471.4 million”.
GCR stated that InfraCredit’s competitive position assessment is also supported by a relatively strong Environmental, Social and Governance (ESG) implementation and monitoring, which includes ESG assessments for guaranteed entities and providing additional market access to lower quality corporates.
“We positively recognise the progress made in clean energy transition within the power sector portfolio and the milestones achieved over the last three years”.
The stable outlook, according to GCR, reflects expectations that InfraCredit’s net leverage ratio will remain sound between 27%-30% over the rating horizon.
“We expect a more diversified guaranteed portfolio going forward, given the strong pipeline of transactions estimated at N627.6 billion which could further support growth in the guaranteed portfolio size over the short to medium term”.
GCR said, although no payment default has been recorded under any of the guaranteed transactions, a significant recourse to InfraCredit could adversely impact its risk assessment.
The rating agency expects InfraCredit liquidity position to remain sound due to the quality of assets allocation and the absence of an accelerated clause on the guaranteed portfolio, with the liquidity sources anticipated to cover liquidity uses by over 4x over the outlook horizon.#GCR Affirms InfraCredit Topnotch Rating with Stable Outlook ECA Reforms to Achieve Mandate, Executive Secretary Says
