Laikipia gets positive rating ahead of Sh1.4 billion bond issue
By Wainaina Wambu | February 24th 2021
Laikipia County has received a stable outlook ahead of its planned Sh1.4 billion infrastructure bond issue in April this year.
The South African rating agency GCR Ratings gave the devolved unit a BB+, meaning it was well placed to honour its debts.
“The stable outlook balances the economic growth in the county and own-source revenue (OSR) against the challenges that the county has had with its wage bill, less than 30 per cent spent on development expenditure, and the accounts payables position.”
“We have also negatively reflected the succession of qualified audit opinions.” GCR said the operating performance was a “slightly negative” challenged by balancing growing revenues against high staff costs and a low development spend.
“Looking ahead, growth in OSR is likely to fall short of expectation due to Covid-19 disruptions, but Laikipia intends to bolster available income by reducing expenditure and improving debtors’ collections.”
Another of GCR’s concern was the inability to assess Laikipia’s debt service track record aside from the operating leases.
“Laikipia has not made use of debt funding over the review period and thus has no debt service track record aside from the operating leases, therefore leverage and cash flow is a positive assessment. However, significant accounts payables suggest there have been challenges in timely settling creditors,” said GCR.
Credit ratings promote fiscal responsibilities and help investors know an entities’ ability to honour debts.
“Investors can now have confidence in our repayment abilities and this boosts our plans to find alternative funding for development projects,” said Laikipia Governor Ndiritu Muriithi yesterday.
He was speaking in Nairobi during the launch of the credit rating event attended by senior Treasury and public finance officials as well as regulators from the capital markets.
Co-operative Bank Director of Corporate and Institutional Banking Jackie Waithaka said lenders value transparency in financing counties.
“We as financial institutions will know what their (counties) resources are and how to match them. The bank is ready to support counties develop the public utilities they need,” she said.
The cash will fund smart towns and irrigation projects. “The next step is to compile our applications and work with Treasury to have the bond issued by April,” said Muriithi.
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