Dangote Sugar Refinery has unveiled its Series 6 and 7 commercial paper offerings, seeking to generate up to N50 billion in the debt market. This initiative is part of the company’s broader N100 billion commercial paper issuance program, aimed at strengthening working capital and supporting operational growth. The announcement comes on the heels of a successful mid-year issuance of Series 4 and 5, which raised a combined total of N42.79 billion at competitive discount rates of 23% and 25%. These previous issuances highlighted strong investor confidence in the company’s financial strategy.
Performance of Series 4 and 5
Series 4, with a 181-day tenor, raised N12.93 billion, while Series 5, featuring a longer 265-day maturity, secured a larger sum of N29.86 billion. These funds were instrumental in bolstering the company’s working capital. Building on this momentum, the launch of Series 6 and 7 reflects Dangote Sugar’s commitment to leveraging Nigeria’s capital markets for strategic funding.
Details of Series 6 and 7 Offerings
The Series 6 and 7 offerings are designed to attract a diverse pool of investors. The key terms include:
- Series 6: A 180-day tenor with a discount rate of 24.9%, yielding an implied return of 28.5%.
- Series 7: A 270-day tenor priced at a 24.55% discount rate, offering an implied yield of 30%.
The subscription window for these papers is set to close on December 12, 2024, presenting an opportunity for investors to support the company’s expansion plans.
Historical Context of the Debt Issuance Program
Dangote Sugar initiated its N100 billion commercial paper program in early 2024 with the Series 1 issuance, which raised N39.39 billion at a 17.08% discount rate for a 266-day maturity. Subsequent offerings included:
- Series 2: N6.15 billion raised at a 19.84% discount rate with a 184-day tenor.
- Series 3: N53.47 billion raised through 254-day notes at a 21.30% discount rate.
To date, the company has raised N142.8 billion across Series 1 to 5, underscoring its capability to attract robust funding from Nigeria’s debt markets. Investors in these offerings have ranged from pension and non-pension asset managers to institutional and individual participants.
Stock Market Trends and Investor Sentiment
Dangote Sugar’s stock market performance has reflected broader market trends in Nigeria. The year began positively, with the stock price climbing from N57 to N67.90 in January, bolstered by a trading volume of 95.1 million shares. However, a bearish trend emerged in February, leading to a decline to N57.50, with trading volumes slightly reduced to 81 million shares.
From February to October, the stock faced challenges due to weakened investor sentiment in Nigeria’s industrial and consumer goods sectors. A brief rally in May, driven by a trading volume of 35.2 million shares, hinted at recovery, but the momentum was short-lived. By October, the stock had dropped to N30.80. Despite this, November brought signs of a turnaround, with the stock closing in positive territory, hinting at renewed investor optimism.
Outlook and Strategic Importance
The ongoing commercial paper program is a cornerstone of Dangote Sugar’s strategy to stabilize operations and sustain growth. By raising essential capital, the company aims to ensure smooth business activities, enhance its financial performance, and rebuild investor confidence. This initiative is expected to play a pivotal role in improving market sentiment and driving the company’s long-term success