Nigerian Breweries issues US$41.67m commercial paper to support its short-term funding

NIGERIA – Nigerian Breweries Plc has announced the issuance of US$41.67 million (N15bn) Commercial Paper (CP) as part of its US$277.78 million (N100bn) commercial paper programme to support the company’s short-term funding.

The funding follows the company’s board decision to pay out the entire net profit of US$53.89 million recorded in 2018 as cash dividend to shareholders for the financial year, despite decline in the performance of the company.

According to a report by Beverage Industry News, the beverage firm is offering 90-day and 182-day Commercial Papers to investors to facilitate raising short-term funds for supporting its operations.

The 90-day CPs carry effective yield of 11.590% and discount yields of 11.2680% while the 182-day CPs carry 14.430% and 13.4614% effective yield and discount yields respectively.

The Series-1 90-day CPs are expected to mature on July 22, 2019 while the Series-2 182-day CPs will mature on October 22, 2019 both of which have been rated Aa by Agusto and AA by Global Credit Rating (GCR).

The brewer unveiled the US$277.78 million Commercial Paper (CP) programme to enable the firm complement other sources of working capital, while diversifying its funding sources to include non-bank investors.

According to the company, the programme aims to improve the company’s ability to periodically access funding at rates mirroring the money market and treasury yields.

A Commercial Paper is an unsecured, short-term debt instrument issued normally by large corporations, typically for the financing of accounts payable and inventories and meeting short-term liabilities.

They are not usually backed by any form of collateral, making it a form of unsecured debt hence only firms with high-quality debt ratings can easily find buyers without having to offer a substantial discount for the debt issue.

Last year, the company also approved a US$27.5 million seven-year loan from the Bank of Industry Limited (BoI) in addition to a US$13.3m working capital over a period of three years.

Nigerian Breweries said its low performance in 2018 was adversely impacted by the new higher excise duty rates that came into effect in 2018 as well as other challenges in the operating environment.

Nigerian Breweries net revenue slipped by 5.8% in 2018 to US$900 million from US$958.33 million in the previous year while its net profit declined by 41% to US$53.89 million from US$91.67 million in 2017.

In 2017, the brewery also paid out its entire net earnings of US$91.67 million as cash dividend.

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