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Lagos asserts credit quality after timely payment to Visionscape bond investors


The Lagos state government, in a show of its credit quality, has honoured its repayment obligation to creditors of waste management company, Visionscape.

Holders of the Municipality Waste Management Contractors Limited (Visionscape) Notes received their coupon and principal payments, September 5, as stipulated in the transaction documents, according to sources familiar with the deal.

This payment confirms the resolve of the Lagos State Government (LASG) to meet all its financial obligations as at when due. On March 5, 2019, administrative glitches caused a slight delay in interest and principal payments of these notes causing fears in the market that the instrument was in default and raising questions about the standing of any instrument issued with LASG financial support.

Municipality Waste Management Contractors Limited (‘MWMCL’) is a special purpose vehicle set up to serve as a funding structure to finance the acquisition and development of waste management infrastructure in Lagos State. The Notes issued by MWMCL are guaranteed by a 10-year Irrevocable Standing Payment Order (‘ISPO’) issued by the Lagos State Government to cover both coupon and principal payments.

A prior report issued by Global Credit Ratings Co, downgrading the Bond’s Credit rating noted that ‘the LASG confirmed that the payment standstill was not a result of its inability to pay, given the strength of LASG treasury, but rather the inability to secure requisite approval of the State House of Assembly to service obligations’.

The State Government elections held in Lagos in March 2019 were a contributing factor.

Lagos is by far the largest state bond issuer in Nigeria with over N250bn in outstanding bonds held by banks, PFAs and other institutional investors.

The State has issued N145bn in bonds since 2015, a period when no other Nigerian state has issued a bond. With a AA- rating, LASG is more highly rated than most large corporates in Nigeria. Lagos is the only state in Nigeria whose local ISPO (as opposed to one from the FGN deducted as a first line charge from FAAC monthly allocations) is acceptable to institutional investors.

With on time payment of the MWMCL note principal and interest on Sep 5, Lagos has proven that it is a top quality credit that investors can always rely on, according to analysts.