These are not the best of times for Dangote Industries Limited as Fitch Ratings has withdrawn the company’s National Long-Term Rating and senior unsecured rating of ‘B+(nga)’ while maintaining them on Rating Watch Negative (RWN), The Witness reports.
Dangote, a conglomerate based in Nigeria and West Africa, which operates in key business sectors such as cement, fertilizer, oil refining, and food is owned by billionaire Alhaji Aliko Dangote.
In a statement on its website, the rating agency explained that the Rating Watch Negative (RWN) was not resolved due to the pending refinancing of Dangote’s maturing debt.
As a result of the unresolved RWN, Fitch Ratings announced that it will no longer provide ratings or analytical coverage for Dangote, withdrawing them for commercial reasons. The agency further stated that the key rating drivers are no longer applicable due to the withdrawal of the ratings.
This move may also lead stakeholders, including shareholders and bondholders, to speculate about the reasons behind the withdrawal, potentially impacting the company’s stock or bond prices.
The statement reads, “Fitch Ratings has withdrawn Dangote Industries Limited’s (Dangote) National Long-Term Rating and senior unsecured rating of ‘B+(nga),’ while maintaining them on Rating Watch Negative (RWN).
“The RWN was not resolved due to the pending refinancing of the company’s maturing debt. Fitch will no longer provide ratings or analytical coverage for Dangote and has withdrawn them for commercial reasons.”
The withdrawal of Fitch Ratings means the agency will no longer assess or provide opinions on Dangote Industries Limited’s creditworthiness. This move could stem from various factors.
Prior to the withdrawal, in August last year, Fitch downgraded Dangote’s creditworthiness, citing a significant deterioration in the group’s liquidity position due to lower-than-expected disposal proceeds. At that time, Fitch had placed the company’s ratings on negative watch and downgraded its national long-term rating from AA(nga) to B+(nga), due to concerns about financial stability, liquidity, or other risks..
A negative watch indicates concerns about a company’s ability to repay its debt, signaling increased risks and an unstable outlook, as per Investopedia.
Fitch had also warned that a lack of tangible steps to refinance or repay maturing debt could lead to further downgrades and stated that it did not expect a positive rating action until Dangote’s liquidity position improved significantly.
The withdrawal could raise concerns among investors, especially since Dangote was already on RWN, signaling existing downside risks. If other agencies follow Fitch’s lead, Dangote may be seen as a higher-risk borrower, which could increase borrowing costs.
Although further reasons for the withdrawal weren’t specified, the negative outlook prior to the withdrawal might suggest financial or operational challenges.
Fitch Ratings is a leading provider of credit ratings, research, and analysis for global financial markets. It is one of the three nationally recognized statistical rating organizations designated by the U.S. Securities and Exchange Commission and is considered part of the “Big Three” credit rating agencies, alongside Moody’s and Standard & Poor’s.
