Dipo Olowookere
By Dipo Olowookere
To remain afloat and continue to deliver value to shareholders, Cadbury Nigeria Plc is considering a debt-to-equity initiative for its outstanding loan of about $7.7 million (about N7.0 billion).
Business Post gathered that to help settle outstanding third-party loans for raw material imports and other input costs, the beverage firm secured about $23 million from one of its major shareholders, Cadbury Schweppes Overseas, between February 2021 and September 2023.
However, because of the foreign exchange (FX) crisis and tough economic challenges in Nigeria, the company struggled to repay as expected.
This got worse last year when the administration of President Bola Tinubu unified the forex market, leading to the devaluation of the Naira, and putting further pressure on Cadbury Nigeria, resulting in an unrealized exchange loss of N20.6 billion and a loss after tax of N10.2 billion for the period ended September 30, 2023.
It was learned that in the midst of these challenges, Cadbury Nigeria, as of December 31, 2023, has been able to repay $18.6 million to Cadbury Schweppes Overseas as part of the principal and accrued interest, with an outstanding balance of $7.7 million.
With the situation in the country not showing signs of easing anytime soon, the board deliberated on options to clear its balance sheet, and it was agreed that capital reorganisation was the best at hand through the conversion of the outstanding loan into equity.
The board said this strategy would deleverage the balance sheet and reduce pressure on its cash flows, leading to improved liquidity, which could be channelled into better uses by the firm or returned to shareholders via dividends.
According to a notice released by Cadbury Nigeria, this option will help reduce its exposure to FX risk and its impact on earnings, reduce finance costs, and result in improved profitability.
The firm believes that this will improve its financial ratios, such as debt-to-equity and coverage ratios.
potentially enhancing its financial standing and creditworthiness.
To this end, Cadbury Nigeria, subject to the approval of regulators and shareholders, wants to issue additional 402,082,657 ordinary shares of 50 Kobo each to Cadbury Schweppes Overseas at a unit price of N17.50, which will rank pari passu with all the existing shares in the company’s share capital.
The price being offered is the closing value as of December 27, 2023.
The board is planning an Extra-Ordinary General Meeting (EGM) to seek the authorization of shareholders on February 8, 2024, at the Grand Ballroom of the Civic Centre, Lagos, at 10:00 am.
