Fitch rates Dangote Industries’ N300bn Series 1 bond ‘AA’ with stable outlook

BY AKINSOLA ADEDOLAPO

Dangote Industries Limited (DIL) has received a Nigeria national long term rating ‘AA’(nga) with a stable outlook from Fitch Ratings, a global credit ratings company.

The agency also assigned an unexpected national rating of ‘AA’(EXP)(nga) to the senior unsecured notes to be issued by the company’s special purpose vehicle (SPV) from Dangote Industries Funding Plc.

Fitch, in its rating post published on its website, opined that the instrument is for the final receipt of the final documentation which conforms to the analysed information of the company and its promoters, and cited Greenview International Corp has recently taken large ownership in Dangote Industries Limited.

Dangote Industries recently announced the imminent launch of the Dangote Industries Funding PLC Series 1 Bond offer comprising Tranche A – 7-year and Tranche B – 10-year, Fixed Rate Senior Unsecured Bonds, under its N300 billion debt issuance programme which will see the notes listed on the Nigerian Exchange and the FMDQ platform.

DIL is a future key operator in the petrochemical industry through its oil refinery and fertiliser business and it is also a diversified conglomerate in Nigeria which aims to make Nigeria a net exporter of refined petroleum products and petrochemicals by 2026, establishing a downstream industry in Nigeria and being the largest urea producer in the country.

According to the rating note, the DIL is establishing a local bond worth N750 million to help finance the completion of its refinery and petrochemical plant. Also, the proposed programme will have Dangote Oil Refining Company Limited, Dangote Fertiliser Limited, and also DIL’s subsidiaries as co-obligors to the proposed programme.

However, Dangote Oil Refinery Company Limited has a 650,000 barrels per day integrated crude oil refinery and petrochemical plant, which is expected to be Africa’s largest oil refinery, while DFL is expected to be Africa’s largest granulated urea fertiliser manufacturing facility, with a production capacity of up to 2.8 Mtpa.

Per the ratings from Fitch, the agency said, “DIL is a diversified conglomerate in Nigeria with a leading share in the cement business and a future key operator in the petrochemical industry through its fertiliser and oil refinery business.

“Its strategy is to gradually establish a downstream industry in Nigeria and be the largest urea producer in Nigeria. It also aims to make Nigeria a net exporter of refined petroleum products and petrochemicals by 2026,” Fitch stated.

Meanwhile, experts at Fitch have proposed high leverage for Dangote Industries as they estimated the company’s funds from operations (FFO) gross leverage has been high for the year 2021 at above 7x from 4.7x in the previous year (2019) as a result of the continuing capital expenditure funding for the refinery while the rating agency expects Dangote Industries to begin deleveraging meaningfully from 2023.

In the development, Standard Chartered Capital and Advisory Nigeria Limited will act as the lead issuing house, while Afrinvest Capital Limited; Meristem Capital Limited; Stanbic IBTC Capital Limited; Vetiva Capital Management Limited; Absa Capital Markets Nigeria Limited; Coronation Merchant Bank Limited; Ecobank Development Company Limited; FBNQuest Merchant Bank Limited; FCMB Capital Markets Limited; Greenwich Merchant Bank Limited; Quantum Zenith Capital & Investments Limited; Rand Merchant Bank Nigeria Limited; and United Capital PLC, will all act as joint-issuing houses to the issue from Dangote Industries Limited.