Cadbury Seeks Approval To Convert $7.7m Intercompany Loan Into Equity

Cadbury Nigeria Plc has announced its intention to seek shareholders’ approval for the conversion of an outstanding intercompany loan of $7.718 million (₦7,036 billion) owed to Cadbury Schweppes Overseas Limited into equity during an Extraordinary General Meeting (“EGM”) slated for Thursday, February 8, 2024, in Lagos.

This was disclosed in the company’s notice to the Nigerian Exchange Limited and the investing public

If the proposal is endorsed by shareholders, the loan will be converted into equity through the issuance of 402,082,657 ordinary shares of 50 kobo each to Cadbury Schweppes Overseas. Each share will have the same rights as the existing ordinary shares, priced at ₦17.50 per share, based on the Company’s share price as of December 27, 2023, and subject to agreed terms by the Directors, pending regulatory approvals.

The proposed resolutions at the EGM include converting the intercompany loan into equity, authorizing the Board of Directors to execute necessary actions, such as listing the new shares on the stock exchange, increasing the Company’s share capital, and amending the relevant clause of the Memorandum of Association to reflect the adjusted share capital.

This move comes as a result of challenges Cadbury Nigeria faced in servicing foreign currency-denominated loans due to Nigeria’s persistent foreign exchange scarcity, leading to substantial unrealized exchange losses and a loss after tax in the period ended September 30, 2023. Although the company managed to repay a significant portion of the loan, the settlement triggered an estimated foreign exchange loss of ₦13.5 billion.

In response to these challenges, the Board of Directors explored various options and concluded that converting the outstanding loan into equity would optimize the company’s financial position, reducing its exposure to foreign currency risks and deleveraging its balance sheet. The terms of this conversion, as stipulated in a Conversion Loan Agreement (CLA), have been approved by the Board and will be presented for shareholder approval at the upcoming EGM in Lagos on February 8, 2024.