Fitch, a global credit rating agency, says missed contracted services payments by Visionscape Sanitation Solutions have not affected the positive economic ratings of Lagos.
In a statement released on Saturday, Fitch said the state’s B+/(AA+(ngn)/ ratings remained stable and unaffected.
The waste management company had launched a private consortium, SPV Municipality Waste Management Contractors Limited (MWMCL), which issued a N50 billion medium-term note programme.
The bond was issued by MWMCL reportedly to raise funds to purchase recycling trucks and equipment, linking debt service to the proceeds coming from Lagos for the implementation of the waste recycling contract.
In March, MWMCL missed the semi-annual principal and coupon payments worth N800 million after the Lagos house of assembly cancelled the contract.
Some market participants had deemed MWMCL’s default to imply also the default of Lagos, given the state’s irrevocable standing payment order (ISPO) where a stream of its own internally generated revenue was remitted to the SPV account for debt servicing.
“Lagos reportedly committed itself to pay for a service but those payments were discontinued in 2018 once the waste collection halted and the State’s House of Assembly issued a subsequent resolution,” the rating agency said.
“Under Fitch’s criteria, Lagos’ ratings are not impacted because the defaulted debt is not Lagos’ direct debt, as well as because its multi-annual commitment towards Visionscape is unlikely to qualify as a PPP counterparty obligation. This would make the credit quality of the bond and its issuer detached from that of Lagos.”
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