Dangote Cement Plc has announced that it will be raising N50 billion in the fifth, sixth, and seventh series of its N150 billion Commercial Paper (CP) programme.
The offer for the CP opened last Wednesday and will close today, May 24, 2018. Minimum subscription for each of the series is N5 million and multiples of N1000 thereafter.
Breakdown of the series: The series 5 of the CP is for 93 days tenor with an effective yield of 12.38 percent, while series 6 is for 178 days with an effective yield of 13.08 percent. On the other hand, series 7 is for 269 days with a yield of 13.16 percent.
Purpose for the CP: The leading cement maker plans to use the proceeds from the Commercial Paper to meet a short-term financial requirement. The company did not give any further details about this financial requirement.
Understanding what CP entails: A Commercial Paper is an unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts payable and inventories and meeting short-term liabilities. Maturities on commercial paper rarely range longer than 270 days. Commercial paper is usually issued at a discount from face value and reflects prevailing market interest rates.
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. Because commercial paper is issued by large institutions, the denominations of the commercial paper offerings are substantial, usually $100,000 or more. Other corporations, financial institutions, wealthy individuals, and money market funds are usually buyers of commercial paper.
About Dangote Cement: The company is the leading cement manufacturer in Nigeria and Africa. The company operates through two segments, Nigeria and Pan Africa. The company also engages in bagging and distribution of cement; limestone mining; coal production; and property investment activities.
Dangote Cement Plc was formerly known as Obajana Cement Plc. The company was incorporated in 1992 and is headquartered in Lagos, Nigeria.
Dangote Cement Plc is a subsidiary of Dangote Industries Limited. Its stock is currently trading N205 on the floor of the Nigerian Stock Exchange (NSE).