GCR Assigns IR Rating of AA+ to Lagos State Govt’s N200bn Bond
GCR Ratings has assigned an indicative long-term issue rating of AA-(NG)(IR) to Lagos State Government’s proposed up to N200 billion Series 4 Senior Unsecured Fixed Rate Bonds, with the Outlook accorded as Stable
An Indicative Rating is denoted by an ‘IR’ suffix to indicate that a credit rating has been accorded based on review of final draft documentation and expectations regarding final documentation, GCR said.
Ratings analysts added that the Indicative Rating is expected to convert to a final credit rating subject to the receipt of final documentation in line with GCR’s expectations.
“Typically, this suffix will be used when awaiting the finalization of notes for a debt or program issuance. In this case, once the final documents are available the IR suffix may be removed. We expect the rating to convert upon regulatory approval, within the next 180days”.
Lagos State Government of Nigeria is in the process of raising NGN200 billion in Series IV Senior Unsecured Fixed Rate Bonds (the bonds) from the debt capital market.
The indicative rating assigned to the bonds reflects the national scale long-term rating of the issuer, according to the update. GCR affirmed the issuer’s national scale long-term senior unsecured rating at AA-(NG) in July 2025.
“The state has obtained the requisite approvals to raise the bonds, from the Nigerian capital market, under its NGN1 trillion debt and hybrid instrument issuance programme, registered in May 2023.
“The bonds shall constitute direct unconditional, unsubordinated, senior and unsecured obligations of the issuer and rank pari-passu in all respects with all other senior unsecured obligations of the state.
“The proceeds are intended to be utilised for funding various socio-economic infrastructural projects. The bonds shall have a ten-year tenor, maturing in 2035.
“Coupon payment and principal repayment obligations on the bonds will be serviced through monthly transfers from the State’s consolidated debt service account (CDSA) and irrevocable standing payment order (ISPO) into a sinking fund account to be managed by the bond trustees.
“The monthly remittance will commence immediately following the bonds’ issuance. During the first 24 months (moratorium period), about NGN1.77 billion shall be deducted from CDSA.
“This shall increase to NGN2.65 billion for the remaining 96 months to maturity, while NGN1.8 billion will be remitted from ISPO deductions on Lagos State Government’s monthly federal account allocation disbursement.
“The CDSA and ISPO remittances into the Sinking Fund Account shall be utilised for servicing the bond coupon, principal repayments on a semi-annual basis and other obligations in respect of the bonds.”
GCR said, based on its analysis of the expected inflows, both inflows will only provide 1x coverage of semi-annual interest payments during the moratorium period and 1x cumulative debt service when the 24-month moratorium lapses.
As such, there is no additional credit enhancement offered by the contemplated inflows. Accordingly, the long-term rating for the Series 1 Bonds is equivalent to the issuer’s long term senior unsecured rating.
GCR said the final rating is contingent on the proper execution of the security documents in favour of the Bondholders. A change in the rating assigned to the Issuer will directly impact the rating of the Series 4 Bonds.
The stable outlook reflects GCR’s opinion that Lagos State will continue to achieve sound operating performance that supports capital project implementation and allows for debt service costs to be adequately covered. Cadbury Nigeria Shares Hit Oversold, Analysts Now See Upside
