Guinness Nigeria seeks N40bn rights issue to pay down debts

Guinness Nigeria Plc said it plans to hold an Extraordinary General Meeting (EGM) of its shareholders in Lagos on January 24th 2017 to approve resolutions for a N40bn rights issue.

According to a statement released by the company, it believes the rights issue will allow it optimize its balance sheet, while improving its financial and operational flexibility.

What is a Rights Issue?

A rights issue is an offer by a company to its existing shareholders to buy additional new shares in the company at a discount to the market price on a future date. Typically, troubled or cash-strapped companies use rights issues to raise money and pay down debts, especially when they are unable to borrow from other sources.

Guinness Nigeria has experienced financial challenges in the last year due to economic headwinds caused by the drop in global oil price, which has led to naira devaluation, inflation, and weak consumer spending, among others.

The company recorded a net loss of N2bn for the full-year ended 30th June 2016 and a N2bn loss in the first quarter ending 30th September 2016.

In addition, Guinness is said to have external loans totaling N36bn and N40bn in trade payables. In September, it received a $95m loan from its parent company Diageo to help bridge dollar shortages caused by the naira devaluation. In October, Diageo withdrew its offer to raise its equity stake in the brewer by 15.7% citing adverse market conditions in Nigeria in the last year.

If approved at the EGM, full details of the rights issue which is expected to raise up to N40bn when fully subscribed, will be issued prior to the launch. The rights issue, according to the statement, is subject to the approval of the relevant regulatory authorities.

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