• NB, UACN, others opt for debts
Companies are turning to the debt issuance segment of the capital market to raise funds as investors’ apathy at the primary equity market continues to discourage companies from equity issues.
Market reports indicated that debt issues by companies have been on the rise, with N300.04 billion new debt issues listed on the FMDQ Securities Exchange in the first two months of this year.
The latest report by the FMDQ Exchange indicated that total outstanding value of admitted corporate bonds has risen from N1.404 trillion in December 2022 to N1.499 trillion by February 2023. Also, total outstanding value of admitted commercial papers (CPs) increased from N251.46 billion in December 2022 to N366.25 billion in February 2023.
According to the report, the total value of corporate bonds listed on FMDQ Exchange in February 2023 was N115.00billion, bucking the trend in the last two months where there were no listings on the Exchange. Also, the total value of CPs quoted on FMDQ Exchange in February 2023 was N101.84 billion, representing an increase of 22.40 per cent or N18.64 billion over N83.20 billion recorded in January 2023.
FMDQ Exchange noted that debt capital raising were done by companies from various sectors of the economy including financial services, real estate, manufacturing and construction.
Nigeria’s largest brewer, Nigerian Breweries (NB) Plc, will tomorrow close application for a N25 billion CP issuance.
NB is offering up toN25 billion in Series 4, 5 and 6 Commercial Papers under its N100 billion CP programme.
NB stated that it would use the net proceeds of the latest CP issuance to support short-term working capital and funding requirements.
NB, under Series 4, is offering 95-day CPs with discount rate and implied yield of 12.11 per cent and 12.50 per cent respectively. It is simultaneously offering, under Series 5, 186-day CPs with discount and implied yields of 12.19 per cent and 13.00 per cent. The Series 6 CPs have 228-day tenor with discount rate and implied yield of 12.87 per cent and 14 per cent.
Shareholders of NB had also last week approved a resolution authorising the company to take an intercompany loan of 110 million euros from Heineken International, a majority shareholder in the company.
The recourse to loan showed preference for debt issue as a rights issue could also have led to similar capital inflow through foreign direct investment by the parent company, which would have been required to pick its rights in order to maintain its holding structure.
The 110 million Euros loan will be used to settle foreign currency-denominated payment obligations of the company.
The company said the loan was necessary at this time to help it address the challenge of foreign exchange (forex) and pay off some of its overdue foreign currency denominated payables.
The board of the company said the loan would ensure that there was no disruption in the company’s operations due to a shortage of imported raw materials as its procurement agent would have stopped its services as a result of the overdue payables.
“Forex loss was a major impact on our profitability in 2022. Access to forex continues to be a major issue for NB Plc. The increase in our trade payables has been driven majorly by outstanding payments to our foreign trade partners due to unavailability of forex at the official windows,” the board said.
Nigerian Breweries is the pioneer and largest brewing company in Nigeria with over two distinct brands. It has nine fully operational breweries from which its products are manufactured and distributed to all parts of Nigeria. The company also has two malting plants located in Aba and Kaduna. Nigerian Breweries has an export business which dates back to 1986 and contributes to its total revenue. Its current export destinations are the United Kingdom, the Netherlands, United States, Canada, parts of Africa, the Middle East and Asia.
Also, Nigeria’s oldest and largest conglomerate, UAC of Nigeria (UACN) Plc last week closed application list for a N5 billion CP issuance to raise short-term capital to support its balance sheet.
Offer document indicated that UACN sought to raise up to N5 billion through issuance of 270-day commercial papers (CPs). The implied and discount rates for the offer are 14.00 per cent and 12.69 per cent. Minimum subscription to the offer was N5 million and thereafter in multiples of N1 million.
According to the conglomerate, the net proceeds of the issuance would be used to meet the short-term working capital requirements of the group.
UACN Group includes subsidiary and associate companies operating in the animal feeds and other edibles; paints; packaged food and beverages; quick service restaurants; logistics and real estate segments. Members of the group include Grand Cereals Limited, Livestock Feeds Plc, CAP, UAC Foods Limited, UAC Restaurants Limited and MDS Logistics Limited.
The group’s income is primarily generated from three segments: income from subsidiaries and associates, income from investment securities and income from investment property assets. UACN’s financial position, liquidity and credit profile were rated A- and A- from Agusto and DataPro respectively.
UACN Group’s turnover grew by 7.72 per cent from N101.37 billion in 2021 to N109.27 billion in 2022.
Established in 1879, UACN is a prominent holding company with history that predates Nigeria’s independence. It was listed on the stock market in 1974.
The offer prospectus indicated that UACN Group has an extensive geographic footprint in Nigeria, with leading positions in key sectors of the Nigerian economy.
Chemical and Allied Products Plc, another quoted company and subsidiary of the group, is a leading paints and coatings company in Nigeria with a diversified brand portfolio which comprises of Dulux, Sandtex, Caplux, and Hempel.
Livestock Feeds Plc, another quoted subsidiary, produces and distributes poultry feed, feed concentrates, full fat soya and veterinary drugs.
UACN Property Development Company (UPDC) Plc, a quoted real estate firm, is also foremost property development and management company.
Another subsidiary, Grand Cereals Limited is a leading producer of cereals, edible oils, poultry feed, fish feed, ruminant feed and dog food.
UAC Foods Limited is a leading player in the packaged food and beverages industry with three distinct business segments – snacks, ice-cream, and spring water. It owns iconic brands such as Gala, SWAN Spring Water, Supreme and Funtime
In the quick service restaurants business, UAC Restaurants Limited, the first quick service restaurant business in Nigeria with a national footprint, is a joint venture with Famous Brands, responsible for managing the network of Mr Bigg’s and Debonairs Pizza brands across Nigeria
MDS Logistics Limited is a leading logistics provider in Nigeria and offers the complete suite of outbound logistics and supply chain services including warehousing, haulage and distribution.