Flour Mills plans to issue N20 billion fixed rate bonds 

Flour Mills of Nigeria Plc has announced its plan to issue a N20 billion medium-term bonds, which is subject to appropriate pricing.

In a statement to the Nigerian Stock Exchange, the maker of Golden Penny spaghetti said that the proposed issuances are expected to be senior unsecured fixed-rate bonds. The statement went further to disclose that the bonds would have tenors of three years and five years, respectively.

The latest issuance is part of Flour Mill’s previously approved N70 billion issue programme. The company said it had begun the process of getting the needed approval from the Securities and Exchange Commission so that the issuance could take effect.

Flour Mills intends to use the proceeds from the bond issuance to do three important things, including refinancing its existing short-term debt, increase the efficiency of its balance sheet, and ultimately increase the wealth of the company’s shareholders.

Please note that senior unsecured bonds guarantee bondholders a quick payout in the event of default, even though there is usually no specified collateral guaranteeing them.

[READ MORE: PenCom seeks bonds to clear N400 billion arrears as retirees groan)

Also, note that a fixed rate bond is a long-term debt paper that carries a predetermined interest rate. The interest, which is otherwise known as coupon rate, is payable at specified dates.

Flour Mills of Nigeria Plc is the most-capitalised flour manufacturing company on the Nigerian Stock Exchange, following the acquisition and eventual delisting of Dangote Flour Mills Plc. The company’s market capitalisation stands at N94.3 billion, using its current share price of N23.

Incorporated in September 1960, the company engages mainly in flour manufacturing although it has interests in agro-allied and logistics support.

Nairametrics reported that the company’s condensed consolidated and separate interim financial statements for the half-year period ending September 2019 showed a 16% increase in profit after tax.