The board and management of UACN Property Development Company (UPDC), yesterday, secured shareholders' approval to raise N30 billion corporate bond.

Proceeds of the bond, according to the firm, would be used to finance ongoing operations and short-term bank borrowings. Speaking at an extra-ordinary general meeting of the company, in Lagos, yesterday, Acting Chairman of the firm, Larry Ettah, said proceeds of the bond would provide the much-needed long-term capital required to run its operations on a sustainable basis for shareholders' value creation.

He added that real estate development require financial investment over a period of time, adding that the development period, sometimes takes years before cash income from rentals and disposals are received. Ettah said UPDC has in the past relied mostly on internally generated funds and short-term bank facilities of commercial papers and bank overdraft for financing project development.

He disclosed that the level of short-term borrowings has risen to N8.85 billion as at middle of January 2010. Explaining furthermore, Ettah said that UPDC had projects at different stages in its pipeline, requiring expenditure of over N20 billion, pointing out that the global credit melt-down, crash of the Nigerian equities market, recent developments in the banking sector and the ensuing negative impact on the availability of credit, provided a compelling need to raise fund through corporate bond.

Ettah, who is also the Group Managing Director of UACN said UPDC, engaged a team of financial advisers who worked with management and the board to arrive at the decision to issue a corporate bond as a viable funding option, until investor-interest in the equities market returns to normalcy.In his submission, President of Shareholders Solidarity Association, Timothy Adesiyan, while endorsing the proposed bond issuance, said it is not profitable to use short-term borrowing to finance long-term project.

Adebayo Adeleke, who spoke on behalf of Independent Shareholders Association of Nigeria, said he expected the firm to raise more than the proposed N30 billion because of the type of business the company engages in. The firm, in its 2008 report, declared a turnover of N13.2 billion, indicating an increase of 132 per cent over the turnover of N 5.7 billion recorded in 2007.

Profit before tax was N 3.7 billion against N1.4 billion in the preceding year, showing an increase of 159 per cent.

(Source:Guardian)