Key highlights
- The CERPAC N25 billion Securitization Programme is a five-year bond issuance created in May 2017 when Continental Transfert Technique Limited sponsored the incorporation of the special purpose vehicle.
- In November 2019, an asset-backed commercial paper of about N2.87 billion was issued and fully repaid in June 2020.
- DLM Capital Group had raised about N23.011 billion and paid a total sum of N31.144 billion covering both Principal and coupons to date.
DLM Capital Group has said that it redeemed a major part of the CERPAC Receivables Securitization Funding SPV and paid investors involved in the N25 billion Future Flow Receivables backed Securitization transaction, a total of N20.161 billion.
The Group in a statement said these redemptions were for the discrete and Series 1 bonds executed by the Group.
Five-year bond issuance created in May 2017: according to the Group, the CERPAC N25 billion Securitization Programme is a five-year bond issuance created in May 2017 when Continental Transfert Technique Limited sponsored the incorporation of the special purpose vehicle, to raise funds in connection with the funding program for the purchase of current and future receivables accruing to the seller from the sale of the Combined Expatriate Residence Permit and Alien Cards (CERPAC Cards) in Nigeria.
CERPAC receivables Funding SPV is peculiar in the sense that the only metric that informs the success of the company is the performance of the purchased CERPAC receivables, which in turn are used to service the SPV’s debt obligations.
Since its creation in 2017, CERPAC has had four issues: the first N4.877 billion 5-year 18.25% Discrete Bond due 2023, the N12.5 billion 5-year 15.25% Series 1 bond due 2023, N1.600 billion 5-year 15.5% Series 2 bond due 2023, and the N1.250 billion Series 3 bond due 2028.
Asset-backed commercial paper
In November 2019, an asset-backed commercial paper of about N2.87 billion was issued and fully repaid in June 2020. On the 15th of January 2023, the Discrete N4.8 billion and Series 1 N12.5 billion matured and were fully paid. Upon the final payment of both the Discrete and Series 1 bonds, DLM also refunded the total sum of N2.3 billion kept in the Reserve accounts to Continental Transfert Techniques Limited.
Since the course of the CERPAC transaction, DLM Capital Group had raised about N23.011 billion and paid a total sum of N31.144 billion covering both Principal and coupons to date. The CERPAC Series 2 and 3 bonds will mature on 15th July 2023 and 15th July 2028, respectively.
What the Group said
Mr. Sonnie Babatunde Ayere, Chief Executive Officer DLM Group said that the current collateral cover to the remaining investors in Series 2 & 3 as of December 2022 was 34.5x, the average DSCR (including principal) is approximately 4x, and the current credit enhancement is 64.17%.
- “Based on these facts, the rating agencies should have re-rated the deal for an upgrade. This was the first ever SEC-approved combined offer, which allowed the SPV to issue both debt & equity at the same time and from the same prospectus to investors.
Whilst the debt has performed fantastically well, so has the equity. The equity investment returned year-on-year, an average of 55.65% per annum beating most market indices, appreciating from N50 a share to N189 a share as of December 2022.
Finally, whilst this transaction was initially frowned upon by real money managers in 2017, we were glad to note that at final redemption, a big chunk of the paper was finally held by the Funds as they had come to find comfort from its fantastic performance and transparency”.
What you should know
DLM Advisory, headed by Mr. Emeka Ngene, (the Group’s investment banking subsidiary) acted as the Issuing House on the deal while DLM Trust Company Limited (the Group’s Trustee subsidiary) was the Lead Bond Trustee.
The Managing Director, DLM Trust Company Limited, Mrs. Ololade Razaaq said that the receivables had posted strong cashflows over the last decade till date.
- “Since the inception of the program, there has been no record of delinquency or default as all investors received their principal and full coupon as and when due. This was also the first transaction in Nigeria to provide investors with 100% transparency by providing investors with detailed monthly performance reports,” he said.
DLM is a wizard when it comes creating tradable transactions. We need more of these firms to deepen our financial market. They have created liquidity from esoteric areas. DLM is cashing out from transactions. We commend SEC for also catching up to understand these transactions. We are in the age of derivatives and opportunities are limitless.