Lafarge Wants To Raise NGN100 Billion Through Bond To Pay Its Debts

Thomas Cook

Lafarge Africa has just announced that it will be raising a total of NGN 100 billion through the issuance of bond.

The company made it known through a statement and application to The Exchange. As soon as it gets the permission to go ahead, the company will float the bond on the exchange.

It is part of its 100 billion bond programme aimed at raising its capital level to take on the market. Divided into series 1 and 2, an initial NGN 60 billion is expected to be raised in two tranches of N25bn and N35bn respectively this year.

The statement reads thus:

“We refer to previous correspondence on the above subject and write to inform the NSE that further to an application submitted to the Securities & Exchange Commission (‘’SEC’’) on behalf of Lafarge Africa Plc (‘’Lafarge Africa’’ or ‘’the Company’’), SEC – by a letter dated May 27, 2016 confirmed the registration of the Company’s N100,000,000,000 Bond Issuance Programme and the clearance of the draft documents submitted in respect of the Series I and Series II Bond Issuances. The SEC also confirmed the commencement of the Book Build.

Up to N60,000,000,000 Bond Issuance The Company is in the process of finalizing the issuance of the Series I and Series II Bonds, following which the transaction documents will be updated and submitted for clearance by the SEC. The Signing Ceremony will hold once the SEC ‘No Objection’ is obtained.

Additional information will be provided once the allotment of the Series I and Series II Bonds is finalized”

Lafarge arch-rival, Dangote Cement PLC has also used alternative means to raise funds. In March, the company through its Chairman, Aliko Dangote confirmed that it secured about USD 2 billion from the Industrial Commercial Bank of China Ltd.

Also, Dangote confirmed that the company is paying less interest on the facility, saying “The interest rate is okay, quite favourable with me, it’s for my two cement companies that we are establishing in Nigeria.” It is not yet clear on the coupon rate that will be placed on the bond as well as the tenor of the bond. This will determine if the bond will be attractive to investors.

Global Credit Rating, GCR affirmed Lafarge’s long term Issuer rating at AA- in April (The rating means- Very high credit quality. Protection factors are very strong. Adverse changes in business, economic or financial conditions would increase investment risk although not significantly). GCR said in its rating outlook on the bond that net ‘proceeds from both issues will be applied towards refinancing of United Cement Company of Nigeria Limited’s (“UniCem”) UniCem’s local currency and USD denominated bank loans‘.

GCR in its rating opinion said “As a result of the merger, UniCem’s N136bn debt has been consolidated into the Group numbers, pushing up total debt to N148.3bn at FYE15, from just N28.3bn at FYE13. From a net ungeared position at FYE13, net gearing increased 76% at FYE15 (FYE14: 58%). Net debt to EBITDA also increased from 145% at FYE14 to 194% at FYE15.”

If Lafarge is trying to deleverage, raising funds through bonds might be a good way to go. However, its competitiveness is still a question left unanswered. For a market that is projected to grow by 7%-10%, according to GCR’s forecast, Lafarge still has business to do.

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