The Lagos State Government is on the hook for a little known company VODA Infrastructure Refi SPV Plc which plans to raise up to a N52 billion bond in 2024 to refinance existing obligations.
VODA Infrastructure Management Limited (the promoter of the VODA SPV) is a development partner appointed by Lagos State Government of Nigeria (Lagos State or the guarantor) for the development and financing of the Opebi Mende Link Bridge and the Massey Children Hospital projects.
Having raised the required project fund of N70 billion through commercial banks loans, VODA intends to refinance the loans through bond issuances into the Nigerian capital market.
To this end, VODA, acting as the sponsor, incorporated a special purpose vehicle (SPV), Voda Infrastructure Refi Company SPV Plc (Issuer), to raise bonds from the public debt capital market.
The payment obligations (principal repayment, coupon payment, and other related costs) of the issuer in respect of the bond issuance will be fully covered by an irrevocable standing payment order (ISPO) provided by and charged on Lagos State’s internally generated revenue (IGR) in favour of the trustees for the benefit of the bondholders.
In August 2023, VODA raised NGN17.9 billion (USD23.6m) in series 1 bond via private issuance under the programme, with a tenor of 10 years maturing in 2033.
The proceeds were used to refinance part of its bank loans.
Subsequently, VODA intends to raise up to NGN52 billion series 1 bond in 2024 via the newly incorporated SPV.
The bond proceeds would be ultimately applied to refinance the outstanding bank loans related to the identified projects.
The bond will have a tenor of 10 years, with maturity in 2034, and will constitute direct, unconditional, irrevocable, senior, and secured obligation of the issuer backed by an irrevocable and unconditional undertaking of the sponsor and guarantor which is Lagos State.
Echoes of Visionscape
Investment banking sources MoneyCentral spoke to said they were largely unaware of VODA Infrastructure Management Plc, wondering why the Lagos State government is subsidizing the firm by guaranteeing its bond issuances.
“I really don’t know them. I just hope this is not another Visionscape episode. Interest rates are quite high right now for issuers, so getting a guarantee from a major State like Lagos is basically a way to subsidize the borrower and give them a sweet heart deal. The question is why?” a major banker speaking to MoneyCentral said.
Visionscape was a scandal that dogged the former Governor of the state Akinwunmi Ambode, asLagos taxpayers eventually had to pay off the loans of the controversial waste management firm after it unceremoniously exited operations in the state.
The Lagos State Government in its capacity as the Sponsor/co-obligor on Visionscape’s N28.47 billion of 5-year bonds issued at 17.5 percent, and due in 2022, was making monthly payments of N713.7 million into its irrevocable sinking fund accounts backing the bond.
The fund was then used to settle semi-annual coupon payments of N4.28 billion due to Visionscape bond investors such that all Visionscape debt service obligations were met by Lagos.
The interest payments by Lagos continued until maturity of the bonds in September 2022, redemption of which fell on the balance sheet of the Lagos State government.
Details of Voda SPV’s bond guarantee by Lagos
Pursuant to the Deed of Undertaking and the Programme Trust Deed, Lagos State as the guarantor, has irrevocably undertaken to fund the designated Sinking Fund Account (SFA), to be exclusively maintained by the trustees.
The ISPO was approved and issued by the Office of the Permanent Secretary/Accountant General, State Treasury Office and the Permanent Secretary, Debt Management Office, chargeable against Lagos State’s Expenditure Account domiciled at United Bank for Africa Plc.
Lagos further irrevocably undertook to domicile the designated expenditure account with the bank throughout the term of the programme and shall not issue any authorisation to move the expenditure account without the concurrence of the trustees.
Voda Infrastructure Management Limited led by CEO Akindeji Akinniranye, was registered just 4-years ago in September 2020, according to CAC data.
The Lagos State Government’s gross debt (including contingent liabilities) increased to N2.7 trillion in March 2024, due to adverse exchange rate movement as a high portion of the state’s debt, above 53% is foreign currency (FCY) denominated.
In event of a default by VODA SPV, the entire N52 billion bond repayment responsibility will have to be borne by Lagos, adding to its debt burden.
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