Fitch Ratings has downgraded Dangote Industries Limited’s national rating to ‘B+(nga)’ and placed the ratings on Rating Watch Negative.
According to The PUNCH, this is a shift from their previous National Long-Term Rating of ‘AA(nga)’.
In addition, the senior unsecured debt rating issued by Dangote Industries Funding Plc has been downgraded to ‘B+(nga)’ from ‘AA(nga)’.
Dangote Industries was affirmed as ‘AA(nga)’ by Fitch in August 2023. However, the latest rating published on Monday indicates a significant deterioration in the group’s liquidity position.
The downgrade reflects several challenges faced by the group, including lower than expected disposal proceeds, operational and financial underperformance, local currency devaluation, and a lack of contracted backup funding to repay significant debt facilities maturing on 31 August 2024.
Fitch Ratings highlighted, “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.”
Fitch also focused on the immediate refinancing risk, noting that DIL has immediate debt servicing requirements related to the syndicated loan raised to finance the construction of Dangote Oil Refining Company.
The commentary warned that further delays in meeting funding requirements would significantly increase the likelihood of financial restructuring or default, leading to further rating downgrades.
The rating agency also reported that the currency devaluation in June 2023 resulted in the group recording a significant foreign exchange loss of N2.7tn in 2023 due to a mismatch between Dollar-denominated debt and domestic revenues.
Additionally, the group has senior secured debt raised at subsidiary levels amounting to $2.7bn at the end of 2023, representing 49 percent of total group debt.
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.
Fitch noted, “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.”
Regarding the Nigerian National Petroleum Corporation Limited’s (
The rating agency indicated that the Nigerian National Petroleum Corporatio decision not to exercise its option to acquire an additional 12.75 percent stake in the Dangote Refinery by June 2024 could affect the group’s ability to repay its debt.
In 2021, NNPCL purchased a 7.25 percent stake in DORC’s project entity for $1.0 billion, with an option to buy 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.
