Guinness Issues New Shares to Reduce Debt Profile

Solomon Elusoji

Guinness Nigeria is currently at the Nigerian Stock Exchange (NSE) issuing new shares to address its significant gearing ratio, which represents a high proportion of debt to equity.

Between 2015 and 2016, the company obtained loan facilities from various financial institutions to fund working capital requirements and expansion of its operations. Also in 2016, it obtained a $95 million loan from one of its major stakeholders, Diageo, to manage foreign exchange related obligations.

According to a statement from the company, “the net proceeds of the Rights Issue will be used to repay a significant portion of the related party loan and some of the other outstanding obligations to financial institutions, while helping to optimise the company’s balance sheet and strategically position it for future growth.”

The size of the Issue is ₦39,700,688,598 at an Issue Price of ₦58.00 and a Rights Ratio of five new ordinary shares for every 11 ordinary shares held as at the close of business on Wednesday, 15 March, 2017. The opening date of the Issue was July 24 and it will close on August 30.

Guinness Nigeria, recently, has been undergoing some tough times financially, with gross margin declining from 43 per cent to 36 per cent between the first nine months of 2016 and 2017. But the company has put confidence in “its strong strategy of expanding its portfolio, leveraging the route to consumer and productive assets, as well as driving down costs and reducing the debt burden.