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Lafarge Cement N50 billion bond issuance to save Shareholders N10 billion in three years

By on September 26, 2011

Project refinancing initiatives embarked upon by Lafarge Cement WAPCO Plc are expected to save the company and its shareholders N12 billion.

The company explained at the weekend that its N50 billion bond issuance was expected to save between N4 billion and N6 billion in the next three years depending on prevailing interest rates.

Explaining in details, Finance Director, Fred Amobi, said the company also intended saving N6 billion from its earlier refinancing deal with power fund, adding that the fund was on seven per cent all-inclusive for the next 10 years.

“For the power fund financing, we are saving an average of N6 billion, which we will not pay for the period of the syndicated loan”, said Amobi, adding that the company used realistic assumptions in its projection.

Making reference to its N50 billion issuance, Amobi assured shareholders and investors of rewarding returns.

He said: “Investing in Lafarge Cement WAPCO is like investing where you can take your money the next day. We don’t have credit sales in cement. It’s a cash business. Our cash flow is robust.

“Currently, we are using syndicated loan. What we are trying to do is to fix the interest rate so that we are not influenced by every move of the interest. It helps our planning.

“In terms of interest savings, we are going to have a huge savings because we don’t know what the interest is going to be.  If we conclude this transactions, we can plan adequately”.

He explained that the interactive session with stakeholders in Lagos and Abuja was intended to outline the potential and financial status of the company in all ramifications.

Managing Partner of the lead Issuing House for the Bond Issuance Programme- Chapel Hill Advisory Partners Limited, Bolaji Balogun, predicted that the N50 billion bond would be successful because “Lafarge Cement WAPCO is a strong corporate entity in Nigeria”.

He urged stakeholders to take advantage of the offer, adding that the bond is well rated because of the high pedigree, which the company is noted for.

The Managing Director and Chief Executive Officer of the company, Samy Abdelkader, had explained that the first series of the Bond Issuance Programme, which will be a three-year fixed rate bond (2011-2014), is being offered to investors for subscription by way of Book Build.    Subscription to the bond is open to qualified Nigerians, International, Institutional and high net worth investors.

The company explained that interest on the bond will be paid half-yearly, with a bullet repayment of principal at the end of the third year.

Also, the proceeds from this issue will be utilized to re-finance part of the company’s existing variable interest loan facilities on the Lakatabu Expansion Project.

Abdelkader said: “The bond issuance is part of a planned programme to optimize the medium term debts of the Company and thereby address the volatility inherent in the large proportion of the variable interest loan facilities. Currently, approximately 75 per cent of the Company’s medium term debts attract floating interest rates”.

According to the company, “the bond will be secured using the existing security structure of the Syndicated Multi-currency Medium Term Facilities and that the Bondholders represented by Trustees will share in the all assets debenture set up by the company and will rank pari passu with all the existing facility lenders”.

Also, the Series 1 of the Bond Issuance Programme, according to the company   has been rated A+ by Agusto & Co and AA- by Global Credit Rating Co. (GCR) on the strength of the Company’s robust security structure, market positioning and future cash flows.