GCR Assigns IR to Chrisland School Funding SPV N6bn Bond
GCR Ratings has assigned a national scale long term indicative Issue rating of A-(NG)(EL)(IR) to Chrisland School Funding SPV Plc.’s proposed N6bn Series 1 Senior Secured Bonds. According to the rating note, the outlook on the rating is stable.
The emerging market-focused rating agency explained that Chrisland School Funding SPV Plc was incorporated as a special purpose vehicle with the sole object of raising debt capital through bond issuances for the purpose of purchasing the notes issued by the Sponsor, Chrisland Schools Limited.
GCR Ratings said it recently accorded a long-term corporate rating of A-(NG) to the Sponsor, reflecting the resilience of the Nigerian private education sector, Chrisland’s moderately diversified portfolio of schools and steady progression of student enrolments resulting in a conservative recourse to debt funding.
The rating reveals that the Issuer is in the process of registering a N15 billion Bond Issuance Programme with the Securities and Exchange Commission and expects to issue up to N6 billion in Series 1 Secured Bond under the Programme, with a five-year tenor.
The principal redemption will be amortised on a quarterly basis commencing from year four, after a three-year principal lockout period from the issue date, according to GCR.
It said the Bonds shall constitute direct, unconditional, unsubordinated, and secured obligations of the Issuer, backed by a tripartite deed of a legal mortgage on the assets of the Sponsor and shall rank pari passu at all times and without any preference among themselves.
“The bond net proceeds will be utilised to purchase intercompany bonds to be issued by the Sponsor -under an Intercompany Bond Agreement- who will, in turn, utilise it for identified expansion plans and refinancing of the existing loans of the Sponsor”.
GCR said the indicative Issue rating is obtained by applying a notching up approach, starting from the long-term issuer rating of the Sponsor.
The notching approach involves an assessment of the stressed estimated recovery rate expected from a forced sale of the assets that serve as security for the Issuer’s proposed bond obligation, under the assumption that the Issuer is in default, the rating explained.
GCR’s estimated recovery calculations are 27.4% for Series 1 Bondholders, indicating a relatively low recovery prospect versus general senior unsecured recovery assumptions. Read: Lagos State N125bn Bonds Issuance Gets Indicative Rating
As a result, it said the stressed estimated recovery rate of 29% does not qualify the Series 1 Secured Bond rating for any notch uplift.
However, it said as the construction nears completion and the market value of the property increases, GCR would reassess the recovery rate and determine the potential for an uplift to the Secured Bond rating.
In addition, GCR said the stable outlook is underpinned by its expectation that the ongoing expansion plans by the Sponsor will be supportive of earnings growth over the medium term, which will support comfortable debt service metrics, even if gross debt increases.
#GCR Assigns IR to Chrisland School Funding SPV N6bn Bond
