MTN Nigeria shareholders lose N2.03bn amid plan to increase N578bn debt

MTN Nigeria is going ahead to borrow almost N90 billion from the debt market to fund its domestic operations.

The credit will be obtained through bond issuance following regulatory approval. Since the announcement, shareholders investment has been declining, Ripples Nigeria capital market analysis shows.

In a statement released to the investing public, MTN said it is seeking a total of N89.999 billion with a 10-Year Fixed Rate by conducting a series II bond from its N200 Billion Bond Issuance Programme.

“MTN Nigerian Communications Plc (MTN Nigeria) has obtained the approval of the Securities and Exchange Commission to launch the Series II 10-Year Fixed Rate Bond (Series II Bond) announced on 21 September 2021.” the note reads.

The Series II will end the bond programme, which had previously provided the telecommunications company with N110 billion (Series 1) 7-Year 13.0% Fixed Rate Bonds due in 2028, and expected to be paid twice in 2027 and the next year.

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The network provider disclosed that the book build (for the series II), which will determine the share value MTN will exchange its stake for investor capital, will be launched by October 8, 2021.

MTN Nigeria said it’s utilising the bond market to diversify its funding sources, with Ripples Nigeria gathering the telco had sourced for funds through local and foreign facility, as well as commercial papers and trade loans.

Investors selling off, shareholders losing money amid bond issuance plan

With it’s new journey into the debt market, MTN Nigeria will be increasing its debt which was put at N578.33 billion as of June 30, 2021. It had risen from N521.15 billion as of December 31, 2020.

Increasing debt have a negative impact on balance sheet, and often weakens revenue generation and investment, which MTN says it maximises external borrowings on. although the network said in its Q2 financials that, “There are no fixed-term borrowings approaching maturity without realistic prospects of renewal or repayment. We are currently complying with all loan agreements and no loans have been renegotiated.”

However, despite the high confidence MTN Nigeria has in its “strong cash generating capacity”, the capital market seems to think differently, as investors have been selling off since the intention to conduct a Series II bond programme was announced in the fourth week of September.

The sell off among investors has caused MTN Nigeria’s market value to drop 3.3 percent, and cost shareholders N2.03 billion in two weeks.

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