GCR Downgrades Geregu Power over Failure to Meet Debt Obligations
GCR Ratings (GCR) has downgraded Geregu Power Plc’s national scale long- and short-term issuer ratings to D(NG) from A(NG) and A1(NG), respectively.
According to the rating note, GCR has concurrently downgraded the national scale issue rating assigned to Geregu Power Plc’s NGN40 billion Series 1 bond to D(NG).
The downgrade of Geregu Power Plc’s ratings to D(NG) follows the company’s failure to make the scheduled principal and coupon payment due under its Series 1 Bond within the timeframe prescribed by the Trust Deed and related transaction documents.
GCR said the payment remained outstanding after the expiry of the grace period on 6 August 2026. “The missed payment constitutes an event of default under our rating definitions and necessitates a default rating action irrespective of the company’s reported strong liquidity position as of 30 June 2026”.
The ratings analyst said although the default does not currently appear to reflect a deterioration in Geregu’s underlying liquidity fundamentals, it highlights significant weaknesses in treasury governance, internal control processes and raises material questions on the reliability of management representations of the financial statements, factors inconsistent with previously assigned ratings.
GCR said during its most recent rating review and affirmation, its assessment of the company’s debt-servicing capacity incorporated reported cash balances and projected operating cash flows.
The projections included the receipt of about NGN100 billion in proceeds, comprising NGN53 billion in cash and NGN49 billion in non-cash consideration from the Federal Government of Nigeria through the NBET Finance Company Plc in June 2026.
Specifically, cash holdings amounted to NGN56 billion (or NGN27 billion net of restricted cash for bond payment) as of 30 June 2026, sufficient to meet bond service obligations.
While earnings were impacted by the ongoing overhaul of the power plants, the realisation of NGN53 billion in cash proceeds from the outstanding legacy receivables adequately mitigated the negative impacts.
Accordingly, based on the financial information available during both the rating affirmation and subsequent surveillance discussions, we identified no evidence of deterioration in free cash flow, liquidity, or funding access that would ordinarily impair the company’s ability to service the bond obligation.
Notwithstanding this position, the circumstances surrounding the default raise significant flags regarding treasury management, internal controls, and governance processes.
Ratings analysts stated that while the precise circumstances remain under investigation, the available management information points to deficiencies in the monitoring, verification, safeguarding, or governance of funds intended for debt service.
“We have also reviewed the trustee’s bond performance report as of 10 August 2026 and note that the trustee reported the default. Therefore, the default does not appear to have been driven by a lack of liquidity or insufficient cash-generating capacity”.
GCR said rather, it appears more consistent with weaknesses in payment execution, treasury administration, internal controls, or management oversight.
“From a credit perspective, such deficiencies are material and negatively impact our assessment of corporate governance”, ratings analysts said. Global Equities Markets Mixed as Rising Energy Costs Dampen Momentum
