DLM Capital redeems N20.161bn of CERPAC Receivables Securitisation Funding SPV

DLM Capital Group has redeemed a major part of the CERPAC Receivables Securitisation Funding SPV and paid investors involved in the N25 billion Future Flow Receivables backed Securitisation transaction, a total of N20.161billion. These redemptions were for the Discrete and Series 1 bonds executed by the Group.

The CERPAC N25billion Securitisation Programme is a five-year bond issuance created in May 2017 when Continental Transfert Technique Limited (“the Sponsor”, “the Seller”) sponsored the incorporation of the special purpose vehicle, to raise funds in connection with the funding programme for the purchase of current and future receivables accruing to the seller from the sale of the Combined Expatriate Residence Permit and Alien Cards (CERPAC Cards) in Nigeria.

CERPAC Receivables Funding SPV is unique in the sense that the only metric that informs the success of the company is the performance of the purchased CERPAC Receivables, which in turn are used to service the SPV’s debt obligations.

Since its creation in 2017, CERPAC has had four issues: the first N4.877billion 5-year 18.25percent Discrete Bond due 2023, the N12.5Bn 5-year 15.25percent Series 1 bond due 2023, N1.600billion 5-year 15.5percent Series 2 bond due 2023, and the N1.250billion Series 3 bond due 2028.

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In November 2019, an asset backed commercial paper of about N2.87billion was issued and fully repaid in June 2020. On January 15, 2023, the Discrete N4.8bilion and Series 1 N12.5billion matured and were fully paid. Upon the final payment of both the Discrete and Series 1 bonds, DLM also refunded the total sum of N2.3billion kept in the Reserve accounts to Continental Transfert Techniques Limited. Since the course of the CERPAC transaction, DLM Capital Group had raised about N23.011billion and paid a total sum of N31.144billion covering both Principal and coupons to date. The CERPAC Series 2 and 3 bonds will mature on July 15, 2023 and July 15, 2028, respectively.

Sonnie Babatunde Ayere, Group Managing Director/CEO at DLM Capital Group said, “the current collateral cover to the remaining investors in Series 2 & 3 as at December 2022 was 34.5x, average DSCR (including principal) is approximately 4x and current credit enhancement is 64.17percent. Based on these facts, the rating agencies should have re-rated the deal for an upgrade”.

“This was the first ever SEC approved combined offer, which allowed the SPV to issue both debt and equity at the same time and from the same prospectus to investors. Whilst the debt has performed fantastically well, so has the equity. The equity investment returned year-on-year, an average of 55.65percent per annum beating most market indices, appreciating from N50 a share to N189 a share as of December 2022. Finally, whilst this transaction was initially frowned upon by real money managers in 2017, we were glad to note that at final redemption, a big chunk of the paper was finally held by the Funds as they had come to find comfort from its fantastic performance and transparency,” he said.

DLM Advisory, headed by Emeka Ngene, (the Group’s investment banking subsidiary) acted as the Issuing House on the deal while DLM Trust Company Limited (the Group’s Trustee subsidiary) was the Lead Bond Trustee.

Ololade Razaaq, Managing Director, DLM Trust Company Limited noted that the receivables had posted very strong cashflows over the last decade till date. “Since the inception of the programme, there have been no record of delinquency or default as all investors received their principal and full coupon as and when due. This was also the first transaction in Nigeria to provide investors with a 100percent transparency by providing investors with detailed monthly performance reports”.

Other successful securitisation transactions executed by DLM Capital Group include the Primero BRT Securitization, the MAX Receivables Securitization SPV Ltd and the NMRC Pass-Through transaction which is still ongoing.