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Mixta Debt Woes Worsen as Rising Rates Squeeze Developers

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Rising rates are pressuring property companies like Mixta Africa that borrowed heavily on the bond markets to finance their operations.

“The Group and Company have net current liability of N5.576 billion and N12.176 billion as at 31 December 2021 respectively, recurring negative net operating cashflows and a high gearing ratio over the last four years,” audit firm Deloitte and Touche, said about the developer.

Mixta Real Estate Plc, formerly ARM Properties Plc., a leading real estate development company had N67.73 billion in outstanding borrowings at the end of 2021, and paid N7.167 billion as finance costs last year, which is set to rise in 2022 as interest rates increase.

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) on Tuesday hiked its Monetary Policy Rate (MPR) for the fourth time by 100 basis points to 16.5 percent.

The CBN has aggressively raised interest rates to combat inflation, a move that has driven up the cost of debt.

Getting loans from financial institutions or the bond market is now more expensive, which is especially relevant to companies involved in large-scale projects. There is also a worry that it will be more difficult to find tenants for the new buildings, be they residential or commercial.

Mixta booked net impairment loss on assets of N6.788 billion on its Real Estate portfolio of lands, debtors and loans to related parties, according to data seen by MoneyCentral.

The impairment charge on inventory represents Company’s estimate of land inventory imparted by encroachment activities on the Company’s Lakowe Land Bank, according to the company.

“Stakeholders’ engagement continues on an on-going basis complemented by appropriate policing and security enforcement of the Company’s rights over its land assets,” Mixta said.

The Company says it plans to address imminently maturing short term borrowings by a combination of debts repayment and debts restructuring.

The Company successfully repaid N42 billion of maturing short term notes in 2021; and in a measure of the market’s confidence of its solvency, raised N35 billion during the same period.

However, analysts say that among the many industries that are grappling with historically high inflation and rising interest rates, one of the hardest hit has been the real estate and construction sector.

Many builders like Mixta are finding themselves locked into long-term contracts that require them to complete projects at a pre-determined rate, regardless of inflation and rising borrowing costs. This puts them at risk of losing money.

Mixta (Group) reported a loss of N2.73 billion in the 2021 financial year.

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