Cadbury Nigeria has offered to give an additional 402 million shares or 4.42 percent equity in exchange for the $7.7 million (N7.03 billion) debt owed to Cadbury Schweppes Overseas Limited. Cadbury Schweppes Overseas Limited, controlled by Mondel–z International Inc, is a major investor in Cadbury Nigeria with a 74.97 percent stake. In a statement on Tuesday sent to the Nigerian Exchange Limited, NGX Cadbury Nigeria said it borrowed $23 million from Cadbury Schweppes to settle outstanding third-party loans obtained to fund raw material imports and other input costs.
Cadbury Nigeria said it is facing challenges servicing the foreign currency-denominated loans due to persistent foreign currency scarcity in the country.“The liberalization of the foreign exchange market in June 2023 and attendant devaluation of the currency put further pressure on the Company as the Naira value of its foreign currency denominated loans increased significantly,” Cadbury stated. “This resulted in an unrealized exchange loss of N20.6 billion and a loss after tax of N10.2 billion for the period ended, 30 September 2023.”
Cadbury Nigeria revealed that it has sorted $18.6 million of the principal and accrued interest to the investor, leaving an outstanding balance of $7.7 million as of December 31, 2023. It said the settlement of a portion of the loan, however, crystallized an estimated foreign exchange loss of N13.5 billion.
“In light of the above, the Board of Directors of Cadbury Nigeria has considered various options for settling the outstanding shareholder loan obligation and reducing the Company’s exposure to foreign currency risk,” Cadbury noted. “The conversion of the outstanding loan into equity (the “Conversion”) was selected as the optimal option for the Company. It is expected to deleverage its balance sheet and save the Company further foreign exchange losses.”
Cadbury Nigeria said it will reduce finance costs and lead to improved profitability, as well as improve its financial ratios, such as debt-to-equity and coverage ratios, potentially enhancing the company’s financial standing and creditworthiness.
The board approved the conversion, however, on February 8, 2024, as shareholders will vote on the decision at an extraordinary meeting, EGM, before seeking approval from the Securities and Exchange Commission, SEC.
