UACN Property Development Company (UPDC) last week began the process of issuing N15bn bond to partly refinance its existing N22.61bn borrowing in the form of bank loans, commercial papers and overdraft facilities as at December 31, 2016.
The five-year Fixed Rate Senior Guaranteed Bond due 2023 is being issued via a book building process that opened on March 29 and closes on April 13, with FBNQuest Merchant Bank Limited as lead issuing house, while Coronation Merchant Bank Limited is joint issuing house.
Coupon rate is between 15.5% and 16%, frequency is semi-annual, payable in arrears.
While UAC of Nigeria is guaranteeing the bond up to 50% of the principal amount under the series of N10bn, FBNQuest and Coronation are each guaranteeing up to 25% or N3.75bn each and providing a revolving facility of up to N1.25bn to support UPDC’s short term operation working capital requirements.
The Bonds are backed by the unconditional and irrevocable guarantee of the Guarantors, by way of continuing guarantee, of the due and punctual observance by the Issuer of payment obligations in respect of all principal amounts due and payable by the Issuer pursuant to the terms and conditions of the bonds issued by the issuer up to 100% of the principal amount up to a maximum amount of N15bn under the terms of a Deed of Guarantee.
The bond targeted at institutional investors and high net worth individuals as defined by the Securities & Exchange Commission (SEC), is to be redeemed primarily from UPDC’s operational cash flows and if necessary, with support of the guarantee.
According to the prospectus, “an application will be made to the FMDQ OTC Securities Exchange or any other recognized trading platform.”
According to its audited financials for the year ended December 31, 2017, presented last week, UPDC reported a net loss of N2.95bn in the full-year ended December 31, 2017, up from N1.55bn in prior year, just as the group’s current liabilities exceeded current assets by N7.59n, which was however an improvement over the N10.56bn reported in the corresponding period of 2016.
Noting the need to recapitalize the company, Ernst & Young, its external auditors noted “the existence of a material uncertainty which may cast significant doubt on the group and company’s ability to continue as a going concern and therefore, may be unable to realise its assets and settle its liabilities in the ordinary course of business.”
As if these were not enough troubles already, the auditors noted the huge intercompany receivables of N20.89bn, up from N20.79bn from its related parties majorly from joint ventures and subsidiary (UPDC Hotels Limited) which have been operating at a loss, besides their liquidity issues.