Cadbury to Seek Shareholders Permission to Convert $7.7m Intercompany Loan Into Equity

Cadbury Nigeria announced that it would seek shareholders approval before it moves to convert an outstanding intercompany loan of $7.718 million that Cadbury Schweppes Overseas Limited owes into equity in its forthcoming Extraordinary General Meeting scheduled to hold for February 8, 2024, in Lagos.

The Company filed this in a corporate notice to the Nigerian Exchange Limited and the investing public.

Suppose the proposal the firm seeks from shareholders is successful. In that case, the loan will be converted into equity by issuing 402,082,657 ordinary shares of 50 kobo each to Cadbury Schweppes Overseas. 

Each allocated share will have the same rights just like the existing ordinary shares priced at N17.50 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 adjustments at the EGM will involve:

• 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.

• Amending the relevant clause of the Memorandum of Association to reflect the adjusted share capital.

The LEADERSHIP report that this development comes from 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 on 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.

Responding to the challenges, the Company's Board of Directors checked various options. It 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.