Lafarge Africa Plc has announced that the N140 billion rights issue proposed by the company’s directors would help reduce its debt profile, improve cash flow and position the firm for future expansion exercise.
The Chairman of the company, Bolaji Balogun, while addressing shareholders during the company’s investors forum held in Lagos on Monday, explained that aside reducing its debt, the rights issue also represents the right steps towards solving its foreign currency exposure and likely impact on the company’s earnings.
“You may be aware that the company has not raised equity since 2005, with all our investments financed with internally generated funds, and debt provided by the majority shareholder, other lenders and bondholders.
“In addition to reducing our debt, the rights issue to raise up to N140 billion provides all our shareholders the opportunity to increase their investment in the company in the company. The recapitalisation exercise is positive.”
Furthermore, Balogun explained that the largest shareholder, Lafarge Holcim, has expressed commitment to subscribe fully to the rights through a conversion of existing shareholders loans.
“The investment is a strong indication of the group’s continued belief in the Nigerian story. It is the largest rights issue and the largest investment in a listed company by an investor. It reduces our foreign currency exposure by approximately half and improves our cash flow.
“We therefore decided that approximately 50 per cent of our foreign currency debt will be repaid and to maximise further translation losses, we hedged $300million, with non deliverables futures contracts entered into with the Central Bank of Nigeria.”
The President, Pragmatic Shareholders Association of Nigeria, Mrs Bisi Bakare, expressed fears that the company may delist from the exchange on the failure of existing shareholders to pick their rights at the time due to the economic recession facing the country.
She urged the company to produce a written agreement from the Nigerian Stock Exchange as evidence that the company will not delist if the shares are not fully subscribed to by the shareholders.