Cement manufacturing giant, Dangote Cement plc, has announced plans to raise additional N50billion in its 11, 12 and 13 series of its ₦150-billion Commercial Paper Programme to support its short term funding requirements.
A Commercial Paper is a money-market, debt-financing security issued by large companies to meet short-term debt obligations. It is often offered in the short term, usually not exceeding 270 days and is backed only by an issuing bank or company promise to pay the face amount on the maturity date specified on the note.
A Commercial paper is not usually backed by any form of collateral, making it a form of unsecured debt. As a result, only firms with high-quality debt ratings will easily find buyers without having to offer a substantial discount (higher cost) for the debt issue.
Details show that the series 11 has a tenor of 90 days with the effective yield of 13.25 percent discounted at 12.83 percent with a maturity date of 10 October 2019.
The Series 12 also has a 180-day tenor with an effective yield of 13.5percent and a discount rate of 12.65percent with a maturity date of 8th January 2020.
The Series 13 offers CP of 270 days with an effective yield of 14.00percent, and a discount of 12.69percent is expected to mature on the 7th April 2020.
The offer had opened on 9th July 2019 while the offer’s application list would close on 11 July 2019. The minimum subscription is N5 million and subsequently in multiples of 1000.
The paper is rated Aaa by global rating agency, Moody’s and AA+ by Africa’s Number 1 rating agency, Global Credit Rating Co.(GCR)
Moody’s Aaa is assigned to obligations judged to be of the highest quality, while GCR’s AA+ represents a very high credit quality with very strong protection factors.
Dangote Cement had last month issued series 8-10 of the company’s N150bn Commercial Paper while the series 5-7 closed on May 24 this year. Funds raised in the Commercial Paper Programme will be used for capital expenditure, working capital, and general corporate purposes.