Dangote Cement to issue new bonds after thirty-month lull

Dangote Cement will head back to the market for fresh capital after a thirty-month hiatus that saw the corporation value steer clear of the debt market.

It secured the consent of its directors’ board to tap the market for medium to long-term bonds under its N300 billion multi-instrument issuance programme, Nigeria’s biggest company by market value disclosed in a regulatory filing on Friday.

“The Company had filed an application with the Securities and Exchange Commission in respect of the bonds, and relevant approvals have now been received,” according to the document.

The corporation said it is keeping tabs on the market for the right time to launch the offer.

Since May 2022 when it sourced N116 billion, Dangote Cement, which months before then had been relatively active in the fixed-income space tapping bonds and commercial papers to shore up its finances, has kept off debt issuance.

Three issuances, comprising two bonds and a commercial paper in less than twelve months to May 2022, helped raise N316 billion for purposes varying from expansion and working capital to refinancing debt.

Even so, Nigeria’s high interest rate environment is souring the market for corporates looking to fund operations by way of borrowing, causing big corporations like Dangote Cement to rethink their appetite for debt.

MTN Nigeria, the local subsidiary of South African telecoms giant MTN Group, also only last week announced its first debt issuance of N50 billion commercial paper this year.

That compares to last year when it mobilised N375 billion altogether, issuing debt instruments four times.

Nigeria’s corporate bonds, which reached as high as N688 billion in 2022, slid to a five-year low last year, according to data from PwC and FMDQ Securities Exchange.

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At 27.3 per cent after thirteen straight hikes, Nigeria’s benchmark interest rate hit an all-time high in September, complicating options for companies looking to borrow funds.

The reference rate currently lags behind the inflation rate by as much as 6.6 per cent.

It means potential investors are likely to demand some element of comfort in how well companies cover that gap while setting coupon rates before new bonds and related securities can stand a chance of attracting significant interest.

Dangote Cement, whose current liabilities exceeds its current assets by 37.7 per cent according to its latest earnings report, plans to use the bond proceeds to boost working capital and refinance debt.