Cadbury Nigeria to Offer 402 Million Shares to Settle $7.7 Million Debt
Cadbury Nigeria has proposed a plan to address its $7.7 million (N7.03 billion) debt by offering to exchange it for more equity. The company currently owes this amount to Cadbury Schweppes Overseas Limited, which is a major investor in Cadbury Nigeria, holding a 74.97 percent stake and is controlled by Mondelēz International Inc.
The proposed debt-to-equity conversion will lead to the creation of 402,082,657 shares, which will be allocated to Cadbury Schweppes at a price of N17.50 per share.
In a statement released on Tuesday to the Nigerian Exchange Limited (NGX), Cadbury Nigeria explained that it had borrowed $23 million from Cadbury Schweppes to settle third-party loans used to finance raw material imports and other input costs.
The company stated that it has been facing challenges in servicing the foreign currency-denominated loans due to the ongoing scarcity of foreign currency in the country. The liberalization of the foreign exchange market in June 2023 and the subsequent devaluation of the Nigerian currency added further pressure on the company, resulting in an unrealized exchange loss of ₦20.6 billion and an after-tax loss of ₦10.2 billion as of September 30, 2023.
Despite having repaid $18.6 million of the principal and accrued interest to Cadbury Schweppes, there is still an outstanding balance of $7.7 million as of December 31, 2023. However, the partial repayment of the loan led to the realization of an estimated foreign exchange loss of N13.5 billion.
In light of these challenges, the board of directors of Cadbury Nigeria reviewed various options for settling the outstanding loan and reducing the company’s exposure to foreign currency risk. The board considered converting the outstanding loan into equity as the optimal option, as it is expected to deleverage the company’s balance sheet and save it from further foreign exchange losses.
While the board has approved the conversion, shareholders will vote on the decision at an extraordinary general meeting (EGM) before seeking approval from the Securities and Exchange Commission (SEC). This process is expected to take place before or on February 8, 2024.
The proposed plan for the debt-to-equity conversion shows the company’s commitment to addressing its financial challenges and ensuring its long-term sustainability.
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