FITCH DOWNGRADES DANGOTE INDUSTRIES RATINGS OVER LIQUIDITY POSITION
Sahara Weekly Reports That Fitch Ratings has downgraded Dangote Industries Limited (DIL) due to what it says is the significant deterioration in the group’s liquidity position and uncertainty related to its ability to refinance maturing debt related to the syndicated loan raised to finance construction of Dangote Oil Refining Company (DORC).
Further delays in meeting the funding requirements would significantly increase the likelihood of financial restructuring or default and lead to further rating downgrade, according to Fitch.
“The downgrade reflects significant deterioration in the group’s liquidity position following lower than expected disposal proceeds, operational and financial underperformance compared to our prior expectations, also affected by local currency devaluation, and lack of contracted backup funding to repay its significant debt facilities maturing on 31 August 2024,” Fitch Ratings said in an update released Monday.
“We view the lack of DIL’s audited accounts for 2023 as a corporate governance issue.”
DIL has immediate debt servicing requirements related to the syndicated loan raised to finance the construction of Dangote Oil Refining Company (DORC).
Dangote Refinery has a nominal production capacity of 650,000 barrels per day (bpd) of refined oil products, which will be sold in both the Nigerian domestic and international markets.
During the First Half (1H) 2024 the refinery operated at around 50% capacity and produced between 325,000 bpd to 375,000 bpd.
“The EBITDA contribution from DORC has been far below our previous projection,” Fitch said.
Major currency devaluation in 2023, also caused the Dangote group to record a significant FX loss of N2.7 trillion in 2023 as the company faces a mismatch between USD denominated debt and domestic revenues. Fitch expects the devaluation to continue at a higher pace in 2024 leading to more losses.
The group plans to divest a 12.75% 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,” Fitch said.
Fitch expects DIL’s EBITDA margins in cement production to drop further in 2024 following softer retail demand for cement particularly in the Nigerian market as well as limited ability to pass on increased raw material cost to consumers.
Fitch downgraded the National Long-Term Rating to ‘B+(nga)’ from ‘AA(nga)’ and senior unsecured debt rating issued by Dangote Industries Funding Plc to ‘B+(nga)’ from ‘AA(nga)’.
Fitch has simultaneously placed the ratings on Rating Watch Negative (RWN). The RWN reflects uncertainty related to the group’s ability to refinance maturing debt.
Fitch Cuts Dangote Industries on Worsening Liquidity, Possible Default on Refinery Debts
