Companies Raise Through Rights Issue As Restructuring Heightens

(Sundiata Finance) – Nigerian companies are increasingly raising money to shore up capital and pay dollar-denominated debts under threat of a weakened currency.

Total rights issue launched by seven firms across all sectors have hit N329.96 billion and analysts say there is likely to be more issuance as companies are in dire need of strong working capital position to support growth.

Top on the list is Lafarge Africa Plc, the country’s second largest cement producer, with a right issue of N140 billion, half of its shareholders fund.

The company said it needed money to settle a debt of N139 billion owed to parent company, Holcim.

Total long term borrowings in the balance sheet of the cement maker was N105.72 billion in the first quarter of the year while total liabilities stood at N260.37 billion.

Lafarge has a favourable debt position as its earnings are sufficient to meet interest payment; interest coverage ratio of 40 times is above the global standard of 2.50 times.

Next is consumer goods giant Unilever Nigeria Plc with a right issue of N63 billion. The parent company of the Nigerian consumer goods firm plans to inject the cash in order to settle a shareholder/related debt of $59.70 million.

Union Bank of Nigeria Plc, a tier-2 lender said it would launch N50 billion right issues in the second quarter of the year as it seeks to accelerate growth.

For the first three months through March 2017, the lenders’ pre-tax profit dropped marginally by 3 per cent to N4.70 billion. It is trading at 0.37 times book value while share price closed at N5.98 as at close of trading on Friday. Share price closed at N53.80 as of close of tradingon Friday.

Guinness Nigeria has finalized plans to raise N40 billion from the capital market in order to enable the consumer goods firm settle the huge debt in its balance sheet and bolster working capital position.

The company has got a $95 million lifeline from parent company Diageo to help cushion the effects of a dollar scarcity.

Guinness needs such cash injection from the parent company because its earnings can no longer cover interest payment.

Its interest coverage ratio of 0.63 times is below the global benchmark of 2.5 times. Little wonder it recorded a loss of N2.55 billion in the period under review.  Share price closed at N73 on The NSE on Friday.

Forte Oil Plc has planned a right issue of N20 billion in order to take advantage of the growing opportunities in the downstream oil and gas industry.  Such cash injection will improve the company’s capacity the to compete favourably with peer rival firms such as Total Oil, Mobil Oil and ConOil. Share price closed at N55.80.

UAC Nigeria, one of the largest conglomerates in the country, says it is considering a right issue to bolster working capital and strengthen the balance of its subsidiaries.

The scotching operating environment has dealt a harsh blow on the conglomerate giant’s subsidiaries. Share price closed at N18 at the end of trading on Friday. (Source: Business Day)

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