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Home Business News

Visionscape default leaves Lagos State on the hook

Onome Ohwovoriole by Onome Ohwovoriole
March 6, 2019
in Business News, Company News
Visionscape

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A likely default by Visionscape on a N27 billion bond may have left the Lagos State government on the hook since it put up a guarantee for the firm.   

Hearing of the default by Lagos State on the VisionScape bond and I think this is a very good time to bring this thread up again!!

These are questions we must get answers to! Very few people in govt use the stuff between their ears@Ambrosia_Ijebu @ugodre @nonso2 @TunjiAndrews https://t.co/cvkKEE6Nmw

— Zeal Ak (@zeal_a) March 6, 2019

Boss it’s just our financial press acting like half baked financial literates. LASG guaranteed the bond they are not primary obligor. They come in now that the obligor has defaulted.

— Olufemi Adebayo (@blessed_04) March 6, 2019

While the reports suggest Lagos State defaulted on the bond, it merely provided a guarantee.  

An issuer backed by a conditional subnational guarantee defaulting isn’t the same as the subnational itself defaulting. NB: this isn’t a defence of the underlying issue.

— Akin Oyebode (@AO1379) March 6, 2019

 

The chain of events  

In March 2017, the state government signed a new environmental law christened the Cleaner Lagos Initiative.  

Visionscape was handed residential waste disposal, a turf that was prior to this run by Private Sector Participants (PSPs). 

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The State Executive Council in March 2017 passed a resolution to secure the financing structure adopted by Visionscape and its partners to raise up to N50 billion in bonds for the implementation of the CLI through the issuance of an Irrevocable Standing Payment Order (ISPO) as a charge on the State Internally Generated Revenue Account/ Environmental Trust Fund. 

The company thereafter raised an initial first tranche of its bond issuance, an N27 billion, 17.5% fixed rate, a five-year bond due 2022. 

What may have led to the default  

The company in October last year, shut down operations citing heightened political tension in the state and reported cases of attack on its employees, destruction of its operational vehicles and equipment. 

John Irvine, MD of the firm in an interview held last year suggested payments where performance-based.  

Now about funding, what we are doing is a performance-based contract or project. If I don’t perform I don’t get paid. For instance, if I had to collect a million tons of waste in January and I only collected 998 tons, of course, I would not get paid for that month because it is performance based.

It is unknown if the firm has received any payments since it suspended operations.

Implications of the default  

Since Lagos State has guaranteed the bond, and the company has been unable to meet the required payments, the state government may have to make the required payments.  

Some reports, however, suggest that the state government was yet to make payments into a sinking fund.

The wider picture

The reported default by the company, not only increases the risk premium of the state but companies that may wish to enter into similar agreements with state governments.

 


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Tags: Lagos State GovernmentVisionscape Sanitation Solution Limited
Onome Ohwovoriole

Onome Ohwovoriole

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via onome.ohwovoriole@nairametrics.com

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