Dangote Cement just issued its Series 1, N100 billion, bond as part of a N300 billion Shelf program it filed with the regulators.
The Cement producer which is the largest in Africa has big plans for the proceeds of the bond, details of which are outlined below.
Refinancing of Shareholder Loan
Dangote Cement Plc (DCP) has been largely supported by loans from its parent company Dangote Industries Limited, where expedient.
As at December 2019, Dangote Cement had an outstanding balance of about N37 billion in Shareholder loans. As this is short-term bridging finance, DCP plans to replace a portion of the shareholder loans with longer term funding from the Bond issue.
Nigeria Expansion Projects
Dangote Cement is currently constructing two 3 million-ton plants each in Okpella and Obajana in order to boost its export strategy of supplying clinker and cement across West African markets.
The Obajana project is well advanced whilst the Okpella project is at about 40 percent completion.
The Issuer is also currently constructing export terminals in Apapa (Lagos), and Onne (Port-Harcourt).
The projects are well advanced and will be capable of handling up to 6 million tons of clinker / cement export at maximum capacity utilization and would generate substantial foreign exchange and help improve Nigeria’s balance of trade.
The total costs of these projects are estimated to be N312 billion (circa U$860,000,000).
These projects are currently being funded by a combination of internally generated cash and short-term borrowings.
A portion of the proceeds from the Bond issuance will therefore be used to support further capital expenditure in relation to these projects, whilst refinancing previously incurred associated short–term debt.
Dangote Cement will also apply a portion of the proceeds raised from the Offer towards its operational working capital requirements.
Accordingly, the estimated net issue proceeds of the Series 1 Bond – being N98,834,423,000.00 following the deduction of the offer costs of N1,165,577,000.00 representing 1.17% of the gross issue proceeds – will be utilized for the purposes stated above.