MON NOV 18 2024-theGBJournal| Dangote Cement Plc’s recently announced N300 billion senior unsecured domestic medium term note program (DMTN), has been assigned a (P)Caa1 local currency rating by rating agency, Moody’s.
The program was approved by the cement maker’s board last week after the company submitted an application to the Securities and Exchange Commission and obtained the necessary regulatory approvals.
This is the second multi-instrument issuance program that Dangote Cement has launched, and highlights the company’s ongoing commitment to reduce its reliance in foreign currency.
Moody’s also assigned a Baa3.ng national scale rating (NSR) rating to the company’s proposed N100 billion series 1 senior unsecured notes to be issued under the DMTN program, which will be used to refinance hard currency debt and for working capital.
The rating, according to Moody’s is supported by Dangote Cement’s strong market presence in Nigeria and other African markets in which it operates, high gross margins of above 50% on a Moody’s-adjusted basis; low leverage of 1.6x, as measured by gross debt/EBITDA, and adequate interest coverage of 3.0x, as measured by EBIT/interest expense, for LTM September 2024; and a track record of ensuring credit metrics remain strong through operating and project build cycles.
Moody’s views the development as a positive step by Dangote Cement to reducing its reliance on short-term debt which as of September 2024 represents 80% of the company’s total debt stock.
”However, Dangote Cement’s liquidity remains exposed to ongoing refinancing risks because of its high proportion of short-term debt and sizeable annual dividends payments (M337 billion},” Moddy’s noted.
The rating agency also observed that the issuance will have a limited impact on leverage given proceeds will be used to partly repay debt.
”Post the bond issuance, we expect gross debt/EBITDA to remain conservatively positioned between 1.5x and 2.0x for 2024,” Moody’s said.
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