GCR Downgrades Capital Trust over Payments Default
GCR Ratings (GCR) has downgraded Capital Trust Investment and Asset Management Limited’s national scale long and short-term issuer ratings to SD(NG) respectively, from BBB(NG) and A3(NG) respectively.
In its rating note, the emerging market rating agency said its decision follows evidence of selective default on the debt note issued by Capital Trust.
Capital Trust’s defaulted on the outstanding interest and principal obligations owed to the investors in its N15 billion secured debt note issuance, according to GCR. Hence, the ratings downgrade to SD(NG), GCR said adding that this is however, not a widespread default.
In the rating note, GCR said Capital Trust issued the N15 billion notes in December 2020 at annual interest rate of 12.5% and on-lent the proceeds to Sokoto State Government at 13.5%.
The notes have a 30-month tenor and a maturity date of May 2023, GCR ratings said, adding that in 2021, the Sokoto government prepaid N10 billion of the notes but given the structure of the debt note, Capital Trust could not make immediate payment to investors.
GCR hints that early redemption was subject to 45 days’ minimum notice period to the Trustees.
The asset manager subsequently, through its sister company, Capital Trust Partners Limited, invested the received sums in the acquisition of some properties in Abuja, to avoid negative carry.
“However, given that the processing of the title documents for the properties purchased had not been concluded, when outstanding obligations were due, the manager could not easily sell of the asset and thus defaulted on the notes”.
GCR Ratings said as of December 2023, Sokoto State had fully paid the notes however, Capital Trust had yet to redeem its obligations to investors due to the issues highlighted above.
The rating firm added that Capital Trust is in the process of restructuring the outstanding debt, with plans underway to perfect title documents of the properties and sell same.
“Interest and principal payment obligations due to investors from the manager currently registers at over N5.5 billion”, the rating note said. #GCR Downgrades Capital Trust over Payments Default
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