International rating agency Fitch Ratings has downgraded Dangote Industries Limited’s national Rating to ‘B+(nga) and placed the ratings on Rating Watch Negative.
This is coming from a National Long-Term Rating of ‘AA(nga)’.
Also, the senior unsecured debt rating issued by Dangote Industries Funding Plc has been reviewed downwards to ‘B+(nga)’ from ‘AA(nga)’.
Dangote was affirmed AA(nga) BY Fitch in August 2023.
According to the latest rating, published yesterday, the downgrade reflects a significant deterioration in the group’s liquidity position.
The group’s liquidity position was said to have, “followed lower than expected disposal proceeds, operational and financial underperformance compared to our prior expectations, also affected by local currency devaluation, and lack of contracted backup funding to repay its significant debt facilities maturing on August 31, 2024.
The rating firm also said, “We view the lack of DIL’s audited accounts for 2023 as a corporate governance issue. The RWN reflects uncertainty related to the group’s ability to refinance maturing debt.
“Lack of tangible steps to refinance or repay the maturing debt would lead to further downgrade while we do not expect a positive rating action until the company’s liquidity position improves substantially.”
Focusing on the immediate refinancing risk, Fitch said, DIL has immediate debt servicing requirements related to the syndicated loan raised to finance the construction of Dangote Oil Refining Company.
Further delays in meeting the funding requirements would significantly increase the likelihood of financial restructuring or default and lead to further rating downgrade.
The commentary added that currency devaluation in June 2023 caused the group to record a significant foreign exchange loss of N2.7tn in 2023 on the back of a mismatch between Dollar-denominated debt and domestic revenues.
Also, the group has senior secured debt raised at subsidiary levels amounting to $2.7bn at end-2023 representing 49 percent of total group debt.
The rating agency said, “The debt structure also includes on-demand shareholder loans from its ultimate parent, Greenview plc, amounting to $2.3bn, representing 43 percent of total debt.
“We view the shareholder loans as subordinated debt. The company has also raised senior unsecured debt amounting to N350bn with long-dated maturities in 2029 and 2032 to finance capex requirements.”
Focusing on the NNPCL’s stake in the Dangote Refinery, the rating agency indicated that the decision of the national oil firm not to exercise its option of acquiring an additional 12.75 per cent as of June 2024, may have an impact on the group’s ability to repay debt.
In 2021, Nigerian National Petroleum Corporation acquired a 7.25 percent stake in DORC’s project entity for $1.0bn, with an option to purchase the remaining 12.75 percent stake by June 2024.
“Since the option has not been exercised, the group plans to divest a 12.75 percent stake in DORC in 2024. The group intends to service its significant syndicated loan maturing in August 2024 from the equity divestment.
However, timely divestment and meeting the imminent maturity is highly uncertain in our view,” part of the commentary read.
