Dangote Cement Plc (NGX: DANGCEM) is contemplating borrowing money from the capital markets to fund expansion and other projects.
Africa’s largest cement producer announced on Wednesday that it has obtained approval from its Board of Directors to access the Capital Markets for medium to long-term debt funding.
The Company’s management also disclosed that the proceeds of the bonds will be applied towards funding expansion projects, refinance existing short-term debt and for general corporate purposes.
The Company has submitted an application to the Securities and Exchange Commission in respect of the bonds, and relevant approvals have now been received. The bonds will be issued imminently, subject to favourable market conditions. This will be the second issuance of bonds under Dangote Cement’s N300 Billion Debt issuance programme.
On 25th March 2021, the company announced it obtained both Board approval and had submitted an application to the Securities and Exchange Commission (SEC) for the registration of a bond issuance programme.
Upon regulatory approvals, the company was to explore its medium to long-term debt funding options through the debt capital market, subject to favourable market conditions.
The company has since set about securing N300 billion in series on bond issuances to be used capital expenditure of the Company’s expansion projects, short term debt refinancing, and working capital requirements.
On June 15, 2022, DANGCEM announced the successful issuance of N50 billion Series 1 fixed rate senior unsecured bonds under the N300 billion multi-instrument issuance programme.
The bonds were issued on May 26 2021 at coupon rates of 11.25%, 12.50% and 13.50% for the 3, 5 and 7-year tranches respectively.
A review of the 2021 Audited Financial Statements of DANGCEM released recently to NGX Regulations Limited shows that the company has short term financial liabilities amounting to N401.39 billion and long term financial liabilities of N176.56 billion as at 31 December, 2021.
The financial liabilities included but not limited to;
- The loans from Bulk Commodities International, a related party, are denominated in USD with interest rate ranging from 6% to 8.5% per annum. As at 31 Dec., it amounted to N21.80 billion on the balance sheet.
- The Company issued bonds with a total face value of ₦150 billion and a coupon rate of 11.25% to 13.5%. As at 31 Dec., this amounted to N147.78 billion on the balance sheet. The tenure is between 3 to 7 years.
- Commercial papers were issued under a programme with a face value of ₦41 billion. The tenure is between 90 days and 270 days with discount ranging from 8.5% to 10.0%. As at 31 Dec. it amounted to N38.97 billion on the balance sheet.
- Bank loans include Letters of credit (LCs) obtained to finance inventories, property, plant and equipment. The amounts to N221.84 billion as at 31 Dec on the balance sheet. The average interest rate is Libor plus 7.4%.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur