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N35bn bond: Flour Mills kick-starts book building process





Flour Mills of Nigeria Plc has announced the commencement of book building for its N35 billion Series 1 Senior Unsecured Bond Issue under a N70 billion debt issuance programme, following clearance received from the Securities and Exchanges Commission (SEC).


According to a statement by the company, the book building process will span a period of 4 business days, between November 29th and December 2nd, 2010.

The statement noted that the company is planning to raise a target issue of N35 billion in respect of the first tranche, at an indicative coupon range between 10 per cent to 12 per cent.


It stated that the purpose of the capital raising is to refinance existing loans, provide funds for future investments in capital projects aimed at enhancing capacity of the food business, as well as augmenting the company’s working capital.


The statement reads, “The Bonds will be issued on a fixed rate basis, for a nominal tenor of 5 years. The coupon is payable every 6 months, whereas the principal repayment will be amortised from beginning of year 3 until final maturity, following a grace period of 24 months.


In recognition of the sound credit fundamentals of the company and its strong cash flow generating capacity, the bond issue has been rated A by Agusto & Co, Nigeria ’s foremost rating agency.


“Prospective investors are to submit bids to any of the Issuing Houses (UBA Capital Limited, Guaranty Trust Bank Plc and Zenith Capital Limited) or named Placement Agents on the transaction (Stanbic IBTC Bank PLC, FCMB Capital Markets Limited, FSDH Limited, Greenwich Trust Limited, Afrinvest West AfricaLimited and Cowry Asset Management Limited).”


The company had explained that the decision by the company to raise N70 billion from the capital market through a bond issuance programme, was borne out of the need to increase its investment activities and provide the much needed financing to expand its operations and activities.


On the modalities for raising the bond, Managing Director of the company, Dr. Emmanuel Ukpabi said, “Although we obtained approval for the establishment of a debt issuance programme by way of shelf registration for up to N70 billion. It is our intention to initially offer a corporate bond of up to N35 billion and keep the balance of N35 billion as a shelf registration.


“This will give us the agility and flexibility to readily access the capital market in case of need without necessarily repeating the processes of filing applications with the regulatory authorities.”


The bond issue, according to him, will enable the company gain access to cheaper source of finance and take advantage of interest rates which have been on a downward slide for a couple of months following tensions in the financial sector.


“We intend to apply the proceeds of the bond issue,” Ukpabi said, “to refinance our existing term loans, provide funds for our future investments in capital projects aimed at enhancing our existing milling capacity over the next two years; undertake new investments in the food and/or cement sectors and augment our working capital.”

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