In a regulatory filing seen by Business Insider Africa, MTN Nigeria explained that the commercial paper issuance is part of a strategy to diversify its funding options.
The series 1 and 2 commercial paper issuance falls under MTN Nigeria’s 150 billion naira ($361.8 million) commercial paper programme. Proceeds from the exercise would be used to increase working capital for the telecom operator, as well as serve other general corporate purposes.
It is worth recalling that MTN Nigeria recently received final approval from the Central Bank of Nigeria to start operating Momo Payment Service Bank Ltd in this West African country. As such, he would need working capital to facilitate the new venture.
“MTN Nigeria Communications Plc (MTN Nigeria or the Company) hereby notifies Nigerian Exchange Limited and the investing public of its N127 billion Series 1 and 2 commercial paper issuance under its Registered Commercial Paper Program of N150 billion.” says part of the public notice.
Stanbic IBTC Capital Ltd served as lead bookrunner for the deal, according to MTN’s statement. Chapel Hill Denham Advisory Ltd also helped arrange the deal, alongside Coronation Merchant Bank, FBNQuest Merchant Bank, Standard Chartered Capital and Advisory Nigeria Ltd, FSDH Capital and UCML Capital.
Commercial paper is divided into two grades. The first is a 184-day issue priced at a yield of 7.50%. This would then be followed by another series 2 issue lasting 254 days which would be priced at 8.50%.
Investopedia defines commercial paper as an unsecured, short-term debt instrument commonly used by companies to raise capital from the public and to support their short-term financial liabilities. The maximum maturity date of a commercial paper is generally 270 days.