In a strategic move, Cadbury Nigeria has proposed an equity swap to address its $7.7 million (N7.03 billion) debt owed to Cadbury Schweppes Overseas Limited. The latter, controlled by Mondelēz International Inc., holds a significant 74.97 percent stake in Cadbury Nigeria.Thank you for reading this post, don't forget to subscribe!
The conversion of the $7.7 million debt to equity would lead to the issuance of 402,082,657 shares, priced at N17.50 per share, which will be allocated to Cadbury Schweppes. The company revealed in a statement to the Nigerian Exchange Limited (NGX) that it initially borrowed $23 million from Cadbury Schweppes to settle third-party loans, primarily used for raw material imports and other input costs.
Facing challenges due to persistent foreign currency scarcity, Cadbury Nigeria explained that the liberalization of the foreign exchange market in June 2023, coupled with currency devaluation, intensified the pressure. This resulted in an unrealized exchange loss of ₦20.6 billion and a loss after tax of ₦10.2 billion as of September 30, 2023.
While Cadbury Nigeria has managed to repay $18.6 million of the principal and accrued interest, an outstanding balance of $7.7 million remains as of December 31, 2023. The settlement of a portion of the loan crystallized an estimated foreign exchange loss of N13.5 billion.
To address the outstanding shareholder loan obligation and mitigate exposure to foreign currency risk, Cadbury Nigeria’s Board of Directors approved the conversion of the outstanding loan into equity. This strategic move aims to deleverage the company’s balance sheet and prevent further foreign exchange losses. The board’s decision is set for a shareholder vote at an extraordinary general meeting (EGM) on February 8, 2024, followed by approval from the Securities and Exchange Commission (SEC).