Flour Mills of Nigeria Plc, Nigeria’s largest food company, intends to raise N40 billion in new debt capital to boost working capital and diversify its balance sheet.
According to preliminary documents obtained over the weekend, Flour Mills is finalizing plans to launch an N40 billion commercial paper issuance, the first two tranches of its N200 billion commercial paper (CP) issuance program.
Commercial paper is an unsecured, short-term debt instrument issued by corporations. It’s typically used to finance short-term liabilities such as payroll, accounts payable, and inventories. Commercial paper is usually issued at a discount from face value.
The net proceeds of the Series 1 and 2 CPs will be used to “support its short-term funding requirements as part of its working capital management strategy,” according to the documents.
Flour Mills’ shareholders had approved major restructuring and capital injection programs for the company.
The massive restructuring could result in the unbundling of one of the largest conglomerates’ component businesses and assets.
Shareholders approved the group’s request to raise N200 billion in additional capital in support of its growth plan and the massive restructuring program.
FMN’s finance costs had jumped by 79.12 percent to N8.150 billion in 2022 from N4.55 billion in 2021; contributing to the marginal increase in profitability recorded during the period.
The Board of Directors of the group confirmed that shareholder approval had been obtained to undertake certain business restructuring and raise additional new capital.
The approvals allow the group to remove or separate all of its manufacturing businesses, as well as all of the company’s power assets.
While the post-unbundling structure of the emerging company is still unknown, market analysts believe FMN may adopt a holding company structure, which allows the company to maximize the potential of each segment of its businesses and assets while significantly reducing the risks of grouped liabilities.
Incorporated in 1960, FMN is a vast food and agro-allied company with operations in flour milling; production of pasta, noodles, edible oil, and refined sugar; production of livestock feeds; farming and other agro-allied activities; distribution and sale of fertilizer; manufacturing and marketing of laminated woven polypropylene sacks and flexible packaging materials; operation of Terminals A and B at the Apapa Port; customs clearing, development of real estate properties for rental, forwarding and shipping agents and logistics
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