THE board of Cadbury Nigeria Plc has sought shareholders approval to convert its $7.7 million (N7.03 billion) debt owed to Cadbury Schweppes Overseas Limited, its parent company, for more equity.
The board approved the conversion, however, on February 8, 2024, shareholders will vote on the decision at an extraordinary meeting, before seeking approval from the Securities and Exchange Commission (SEC).
In an explanatory statement on the proposed debt-to-equity conversion filed with the Nigerian Exchange Limited (NGX), the company revealed that between February 2021 and September 2023, Cadbury Schweppes Overseas loaned $23 million to Cadbury Nigeria to help settle outstanding third-party loans which the company had obtained to fund its raw material imports and other input costs.
“The liberalisation of the foreign exchange market in June 2023 and attendant devaluation of the currency put further pressure on the company as the Naira value of its foreign currency denominated loans increased significantly,” the firm said.
According to the firm, this resulted in an unrealised exchange loss of N20.6 billion and a loss after tax of N10.2 billion for the period ended September 30, 2023.
Cadbury Nigeria said it has been able to repay $18.6 million of the principal and accrued interest to the investor, leaving an outstanding balance of $7.7 million as of December 31, 2023.
It said the settlement of a portion of the loan, however, crystallised an estimated foreign exchange loss of N13.5 billion.
“In the light of the above, the board of directors of Cadbury Nigeria has considered various options for settling the outstanding shareholder loan obligation and reducing the company’s exposure to foreign currency risk,” Cadbury Nigeria said.
“The conversion of the outstanding loan into equity was selected as the optimal option for the Company, as it is expected to deleverage its balance sheet and save the company further foreign exchange losses,” it said.
The conversion of the $7.7 million debt to equity, according to the company, will result in the creation of 402,082,657 shares, which will be handed to Cadbury Schweppes at N17.50 per share.
Cadbury Schweppes Overseas Limited, controlled by Mondelēz International Inc, is a major investor in Cadbury Nigeria with a 74.97 percent stake.
