African cement manufacturing giant, Dangote Cement Plc raised N50 billion capital through the issuance of new Commercial Papers (CP). This is the eighth to 10th series of its N150 billion CP programme, which is aimed at addressing short term financial obligations.
The company offered a tenor of 90 days for the eighth series, with an effective yield of over 12 percent and a discount rate of 10.51 percent. The tenor for the ninth series is 180 days, an effective yield of over 12 percent and a discount rate of 13.35 percent. Meanwhile, the tenth series has a longer tenor of 270 days, effective yield of over 12 percent as well and discount rate at 14 percent.
The expected maturity date for the 90-day CP is September 12, 2019, while the 180-day and 270-day CPs will mature on December 11, 2019, and March 10, 2020, respectively. Application for the offers, which opened on June 7, closed on June 13, 2019. They were issued on June 14, with the minimum subscription initially set at N5 million and thereafter in multiples of N1,000.
According to reports, the net proceeds from the Commercial Papers will be used to bridge a short term funding gap in the operations of the company. A CP is an unsecured, short-term debt instrument issued by a corporation, to raise funds for the financing of accounts payable and inventories as well as meeting short-term liabilities.
The debt security being unsecured means that it is only backed by the issuing bank or company instead of collateral. Thus, only firms with high-quality debt ratings will easily find buyers without having to offer a substantial discount for the debt issue. In this case, Dangote Cement’s rating of Aaa from Moody’s and AA+ from Global Credit Ratings (GCR) means it does not have to scramble for subscribers.
Dangote Cement is a leading cement manufacturing firm headquartered in Lagos, the most capitalised company on the Nigerian Stock Exchange (NSE) and has operations in nine other African countries. Being the largest cement maker in Africa, the company is a significant foreign exchange earner for the Nigerian economy.
During the 10th annual general meeting yesterday, the company’s Chairman, Aliko Dangote revealed plans to attract $700 million in foreign exchange from the exportation of the product to boost the country’s economy. This, Dangote explained, will be achieved through several ongoing projects aimed at increasing capacity. The two cement terminals in Rivers and Lagos States will be completed before the year ends.
“By next year, we will not only export one million tonnes as we normally do now, but we will also be servicing both the domestic and other African countries from Nigeria … We will have a capacity of about eight million tonnes to export and that will generate foreign exchange of about $700 million into the country, to assist the federal government and the group in its other activities across Africa,” the billionaire businessman said.