Telecommunications giants, MTN Nigeria has clarified media reports on its decision to raise N100 billion through Commercial Paper.
This clarification was issued in a release to the Nigerian Stock Exchange (NSE).
The Details: MTN Nigeria said it had not yet released an official notice concerning that information. It also said that the issuance of commercial papers is merely just one of its other financing options, as stated in its introduction Memorandum when listing its shares on the Nigerian bourse. The release also revealed that the telco finances its expenditure through syndicated banking facilities which it will keep on doing in the future.
“We wish to note that in our listing by Introduction Memorandum, we had indicated that “in the past MTN Nigeria financed its expenditure primarily through syndicated banking facilities and it expects to do so in the future in addition to exploring other financing options including but not limited to issuance of commercial papers,” the statement read in part.
The company went further to warn shareholders to desist from reacting to information yet to be authenticated by the company and promised to announce when it will begin exploring financing options that will include issuing commercial papers, officially.
Backstory: Nairametrics reported MTN Nigeria’s decision to raise the sum of N100 billion through Commercial Paper. The development was made public by the Head, Frontier Research at EFG Hermes, Kato Mukuru which was unofficially disclosed at the time during an interview with CNBC. Mukuru however cited his source as a staff member of the Nigerian Stock Exchange (NSE). He also explained that the telco’s motive for moving in that direction is because it is cheaper than getting bank finances or probably the banks does not want to finance it
Understanding what CP entails: A Commercial Paper is an unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts payable and inventories and meeting short-term liabilities. Maturities on commercial paper rarely range longer than 270 days. Commercial paper is usually issued at a discount from face value and reflects prevailing market interest rates.
Commercial paper is not usually backed by any form of collateral, making it a form of unsecured debt. As a result, only firms with high-quality debt ratings will easily find buyers without having to offer a substantial discount (higher cost) for the debt issue. Because commercial paper is issued by large institutions, the denominations of the commercial paper offerings are substantial, usually $100,000 or more. Other corporations, financial institutions, wealthy individuals, and money market funds are usually buyers of commercial paper.