Fitch Ratings, an international credit rating agency, has downgraded Dangote Industries Limited (DIL) from a National Long-Term Rating of ‘AA(nga)’ to ‘B+(nga)’ and placed the ratings on Rating Watch Negative (RWN).
This downgrade also applies to the senior unsecured debt rating issued by Dangote Industries Funding Plc, which was similarly downgraded from ‘AA(nga)’ to ‘B+(nga)’. The latest ratings were published on Monday, reflecting significant concerns about the group’s financial health.
The downgrade indicates a substantial deterioration in DIL’s liquidity position.
The agency highlighted several contributing factors, including lower than expected disposal proceeds, operational and financial underperformance relative to prior expectations, adverse effects from local currency devaluation, and a lack of contracted backup funding to cover significant debt facilities due to mature on August 31, 2024.
Fitch expressed concern over the absence of DIL’s audited accounts for 2023, categorizing it as a corporate governance issue.
The RWN status underscores uncertainties surrounding the group’s ability to refinance its maturing debt. Fitch warned that failure to secure refinancing or repay the maturing debt could lead to further downgrades.
“DIL faces immediate debt servicing requirements related to the syndicated loan raised to finance the construction of the Dangote Oil Refining Company,” Fitch stated.
The agency cautioned that further delays in securing necessary funding could significantly increase the likelihood of financial restructuring or default, potentially leading to additional downgrades.
The commentary further revealed that the group incurred a significant foreign exchange loss of N2.7 trillion in 2023, largely due to a mismatch between its Dollar-denominated debt and domestic revenues, exacerbated by currency devaluation in June 2023.
As of the end of 2023, DIL’s debt structure included senior secured debt at subsidiary levels amounting to $2.7 billion, representing 49 percent of total group debt.
Additionally, the group has shareholder loans from its ultimate parent, Greenview Plc, totaling $2.3 billion, accounting for 43 percent of total debt. These shareholder loans are viewed as subordinated debt.
The rating agency also noted that DIL has raised senior unsecured debt totaling N350 billion, with long-dated maturities extending to 2029 and 2032, aimed at financing capital expenditure requirements.
Fitch highlighted concerns regarding the Nigerian National Petroleum Corporation Limited (NNPCL)’s decision not to exercise its option to acquire an additional 12.75 percent stake in the Dangote Oil Refining Company (DORC) by June 2024.
In 2021, NNPCL acquired a 7.25 percent stake in DORC for $1.0 billion, with an option to purchase the remaining stake.
The agency noted that the group’s plans to divest this stake to meet debt obligations are now uncertain, increasing the risk associated with the group’s immediate financial commitments.
