Cadbury Nigeria Plans $7.7million Debt-to-Equity Conversion
Cadbury Nigeria Plc the food, sweet and drink company has announced plans to convert an outstanding $7.7 million loan from its parent company Cadbury Schweppes Overseas Ltd into equity to reduce higher financing obligations due to the further devaluation of the Naira.
Why is this important: Nigeria has undergone significant economic and monetary reforms since President Tinubu took office in May 2023 which includes the abolishment of the multiple exchange rate system and government intervention in the FX markets resulting in significant devaluation of the naira and acute dollar shortage in the country.
- Cadbury Nigeria Plc borrowed $23 million from a unit of the parent company America-based Mondelez International Inc and has struggled to make interest payments obligations.
- Mondelēz International Inc. is a major investor in Cadbury Nigeria with 74.97 per cent stake and is controlled by Cadbury Schweppes Overseas Limited.
- The company expects to declare 13.5 billion naira in foreign exchange losses for the year ending 2023 and is seeking shareholder approval to convert the outstanding $7.7 million. Cadbury Nigeria will create 402m shares as part of the debt-to-equity swap.
The bottom line: Years of complex and different exchange rates with constant market intervention have harmed the Nigerian economy with low output. Nigeria-based companies are struggling with exposure to foreign exchange risk and the negative implications on their earnings. To survive these trying times companies need to explore options that reduce their foreign exchange exposure while meeting the growing demand for the products.
