Nigerian Breweries to convert sizeable debts to equity

Nigerian Breweries is converting loans into equity in a bid to reduce its debt with parent company Heineken.

The resolution, which follows the group’s AGM, was made to convert certain loans, borrowings, and payables owed to shareholders into shares under the proposed NGN600 billion rights issue.

In the document that the company released after the AGM, it stated that “the directors of the company be and are hereby authorised to apply any outstanding shareholder loan, trade payable, or any other loan facility due to any person from the company as may be agreed by the person and the company, towards payment for any shares subscribed for by such person under the rights issue”.

Nigerian Breweries’ move to convert some of its loans into equity has been outlined via local reports to be primarily aimed at reducing its debts to its parent company Heineken. The tactic is, according to local reports, categorised as an “inter-company loan.”

This conversion addresses amounts owed to shareholders, classified under “amount due to related parties” which will see shareholders reimbursed of losses.

Nigerian Breweries currently has inter-company loans and interest of about NRG88.3 billion (£50.3 million), which are owed to its parent company Heineken. A summation of the group’s inter-company loans and its “amount due to related parties” stands at a total of NRG254.4 billion (£144.7 million).

Back in 2014, Heineken announced plans to merge its majority owned subsidiaries Nigerian Breweries plc and Consolidated Breweries plc to “fully capitalise” on the future growth of Nigeria’s beer and malt drinks market.

At the time, a spokesperson for Heineken had said noted how Africa was one of the world’s most attractive and fastest growing regions for beer and described it as a key platform for Heineken’s continued investment and future growth.

The spokesperson also identified how Nigeria was “the continent’s largest economy, with a significant, growing beer and malt drinks market, underpinned by favourable demographics”.

Nigerian Breweries brands include Heineken, Star, Gulder, Legend, Life, Goldberg, Amstel Malta, Fayrouz, Malta Gold, and Maltina.