FACED by huge finance costs, MTN Nigeria Communication Plc said it had raised N125 billion via its Series 6 and 7 commercial paper to reduce its cost of debt.
The telecom company disclosed this in a corporate filing released to the Nigerian Exchange Limited on Wednesday, August 30 and signed by its company secretary, Uto Ukpanah.
“The CP Issuance aligns with MTN Nigeria’s strategy to continue diversifying its funding sources and reducing its average cost of debt. The proceeds will be applied towards short-term working capital requirements,” the company stated.
The debt was raised under its upsized N250 billion ‘Commercial Paper Issuance Programme.
The ICIR can recall that the telecom operator had in March this year raised N125 billion series 4 and 5 commercial paper under its N150 billion commercial paper programme.
Giving details of the series 6 and 7, MTN Nigeria hinted that it had sought to raise N100 billion, and after the offer, recorded 146 per cent subscription with N125 billion issued across both series.
It said it issued 181-day commercial paper at a yield of 13 per cent and a 256-day commercial paper at a yield of 13.5 per cent with an issue date of August 23, 2023.
“We are pleased with the support received from the investor community, having recorded 146 per cent subscription. This reflects MTN Nigeria’s robust financial capacity, the brand’s strength, and our leading role in the industry,” the chief executive officer, Karl Toriola, added.
Meanwhile, a commercial paper is an unsecured, short-term debt instrument issued by corporate entities. It is typically used to finance short-term liabilities such as payroll, accounts payable, and inventories.
A look at MTN Nigeria’s financial records in the first half of the year revealed that the company did not have enough capital to pay for its short-term obligations, hence the need to raise funds
Its unaudited financial statements for the six months ended June 30, 2023, revealed that current asset of N1.034 trillion was less than its current liabilities of N1.623 trillion.
By implication, the company’s working capital was negative, with over N588 billion, and impacted the business’ day-to-day operations.
The company’s finance costs (interest expenses), also rose by 161.81 per cent to N237.58 billion compared to N90.74 billion in June last year.
Details of the finance costs disclosed that interest expense on leases rose to N49.67 billion from N46.62 billion and interest expense on borrowings to N51.62 billion from N28.014 billion.
In the first half of this year, the company suffered a derivative liabilities loss on a fair valuation of N3.63 billion.
The company also went into a more profound financing cost as its net foreign exchange loss surged by 864.50 per cent to N131.45 billion from N13.63 billion, while its interest expense on banking fees reduced from N1.203 billion to N2.48 billion.
The Central Bank of Nigeria (CBN) had collapsed all foreign exchange windows into investors and exporters (I&E) windows on June 14 to allow for a free float of the country’s currency against the dollar and other global currencies, The ICIR reported.
“MTN Nigeria’s finance charge was impacted by the devaluation of the Naira from N461.10/$1 in December 2022 to N756.08/$1 in June 2023, which followed the policy change,” the company stated in the report.
MTN Nigeria debuted its issuance of commercial paper in June 2020 and raised N100 billion after its offer was over subscribed by 400 per cent.
In the midst of rising cost of funds, a number of firms have been issuing commercial papers to raise short-term funds.