Fitch Ratings has disclosed that the Dangote Group plans to sell a 12.75 percent stake in Dangote Petroleum Refinery due to liquidity concerns. The proceeds from this sale are intended to help service a substantial syndicated loan that is due on August 31, 2024.
In a statement on Monday, Fitch explained that NNPC had acquired a 20 percent stake in the Dangote refinery for $2.76 billion in September 2021. However, Aliko Dangote, Africa’s richest person, mentioned on July 14 that the national oil company now holds a 7.2 percent stake in the refinery.
Fitch clarified that the 2021 deal involved NNPC purchasing a 7.25 percent stake in Dangote Refinery’s project entity for $1 billion, with an option to acquire the remaining 12.75 percent by June 2024. Since this option was not exercised, the Dangote Group is now looking to sell the 12.75 percent stake within this year.
“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 said as of 2023, Dangote Industry Limited’s (DIL) consolidated liquidity profile comprised N1.4 trillion of readily available cash (unaudited) and N400 billion as of “1Q24, with no headroom under the revolver facility”.
“Additionally, we expect further deterioration in FCF due to FX swings and capital requirements in 2024 and 2025. Liquidity is insufficient to address upcoming debt maturities,” the company said.
“The group plans to finance the substantial syndicated loan maturing in August 2024 through the divestment proceeds of 12.75% stake in DORC.”
On July 14, NNPC said the Dangote refinery was informed several months prior of its decision to limit the national oil company’s equity participation at the paid-up amount.
Fitch also downgraded DIL’s long-term credit rating to ‘B+(nga)’ from ‘AA(nga)’ and lowered the senior unsecured debt rating issued by Dangote Industries Funding Plc to ‘B+(nga)’ from ‘AA(nga)’- thereby placing the ratings on negative.
“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 said.
However, DIL received national-scale long-term and short-term issuer ratings of AA+ (NG) and A1+(NG) from GCR Ratings (GCR), which is an affiliate of Moody’s.
