MTN Nigeria Communications Plc has announced that it has raised N125 billion via the successful completion of its Series 4 & 5 Commercial Paper issuance under its N150 billion Commercial Paper Issuance Programme.
The company had sought to raise N100 billion, but the transaction was 125% subscribed.
The CP issuance saw MTN Nigeria issue 188-day commercial papers at a yield of 11.00% and 267-day commercial papers at a yield of 12.50%.
The CP Issuance was completed on 1 March 2023. The proceeds will be utilized for the company’s short-term working capital and funding requirements, in line with its strategy to diversify its funding options.
What it needs the money for?
This move by MTN Nigeria Communications Plc is aimed at securing funds that will be used for its short-term financing needs. This often includes repaying its short-term creditors, account payables, and general working capital requirements.
The successful issuance of the Commercial Paper reflects the company’s strong creditworthiness and its ability to attract investors’ interest. It also underscores the attractiveness of the Nigerian capital market and its capacity to provide long-term funding for companies.
The telecommunications industry is a critical sector of the Nigerian economy, with MTN Nigeria being a significant player in the industry. The successful completion of the Commercial Paper issuance is a testament to the company’s commitment to delivering value to its stakeholders.
- MTN Nigeria’s Chief Financial Officer, Modupe Kadri, said: “The success of this transaction is a demonstration of investor confidence in MTN Nigeria’s ability to deliver on its strategic objectives, and we are grateful for the support we have received from the market.”
The paper sold on higher yields
Nairametrics observes the latest commercial paper was sold at a much higher yield of 12.5% compared to a year ago when yields for a similar sum raised sold at about 8.5%.
- Last April, MTN issued N127 billion Series 1 & 2 Commercial Paper under its registered N150 billion Commercial Paper Programme.
- The issuance comprised two tenors – a 184-day Serie issuance priced at a 7.50% yield and a 254-day Series 2 issuance priced at an 8.50% yield.
- This compares to 11.00% for 184-day and 267-day commercial papers at a yield of 12.50%.
The rise in yields is related to the central bank’s decision to raise rates over the course of the year with its benchmark monetary policy rate rising from 11.5% to 17.5% in less than a year. The central bank’s hawkish monetary policy is aimed at bringing down the inflation rate which is at over two-decade highs.
At N127 billion in commercial papers, MTN is likely to pay a whopping 400 basis points more or 4% more than the prior cost of borrowing. This could impact the company’s net finance cost at the end of the year.
