PZ Cussons to Convert $34m Debt to Equity for Parent
The board of directors at PZ Cussons Nigeria Plc. has approved to convert $34 million out of more than $40million debt owed to its patent company, PZ Cussons Holdings to equities. In an official statement, the company said it will be seeking its shareholders’ approval for the debt to equities conversion deal at an extra ordinary general meeting schedule for March.
Details revealed that PZ Cussons Holdings interest in the Nigerian subsidiary will increase to 82.79% if the debt conversion pull through from 73% stake in the consumer goods company. PZ said the outstanding shareholder loan amounting to USD34,264,544 or ₦51,795,312,646 is expected to be converted to equity at an agreed price of ₦23.60 per share.
The conversion rate is noted to be PZ share price as at close of trading on 12 February 2025, the date before the Board meeting.
In consideration for the Conversion, PZ Nigeria will issue additional 2,194,716,637 ordinary shares of 50 kobo each to PZCH with a plan to increases share capital by ₦1,097,358,318.50 through the creation of 2,194,716,637 ordinary shares of 50 kobo each.
This will allow PZ to accommodate the issuance of the new shares to be allotted to PZ Holdings, its parent. The new shares is expected to rank pari passu with all the existing shares in the Company’s share capital.
Subject to the approval of shareholders, the Board will also seek the approval of the Securities and Exchange Commission for the Conversion and registration of the new shares to be issued, in line with SEC Rules.
The company affirmed that following receipt of SEC approval, the additional shares will be allotted to PZCH and listed on the floor of the Nigerian Exchange Limited
In June 2022, PZ Cussons Holdings advanced an intercompany loan of USD40.26 million to PZ Cussons Nigeria to help settle outstanding foreign currency payables related to raw material imports, operational and other input related costs that had not been possible to settle due to challenges with foreign currency availability.
The company told the Nigerian Exchange that the liberalisation of the foreign exchange market in June 2023 and attendant devaluation of the currency throughout 2023 and 2024 has had a material adverse impact on its financial results.
PZ Cussons stated that the Naira value of its foreign currency denominated loans increased significantly ,resulting in an unrealised exchange loss of ₦157.9 billion, a loss after tax of ₦76.0 billion and a negative shareholders’ equity position of ₦27.5 billion for the financial year ended 31 May 2024.
“While PZCN has continued to record strong operational growth, reporting 34% and 42% year-on year revenue growth for the full and half financial year periods ended 31 May 2024 and 30 November 2024 respectively, further depreciation of the value of the Naira and its adverse revaluation impact on the foreign currency loans has continued to erode PZ Cussons Nigeria’s operational profit resulting in losses after tax and a worsened negative net equity position of ₦34.5 billion as of the latest financial results dated 30 November 2024”.
In light of the above, the Board of Directors of PZCN has carefully considered various options to address the Company’s negative equity position which is considered essential to reposition the Company to the path of profitable sustainable growth.
This includes settling the outstanding shareholder loan obligation and reducing the overall Company’s exposure to foreign currency fluctuation risk.
The Board and the parent company, after extensive discussions, agree that the conversion of a portion of the outstanding loan amounting to USD34.26 million into equity is the most efficient value of debt to be converted into equity and the optimal option for the Company to strengthen its balance sheet and significantly reduce exposure to further foreign exchange losses.
The statement reads that the debt to equities conversion will significantly strengthen PZ Cussons Nigeria’s balance sheet and support its future growth without excessive dilution to the interests of minority shareholders.
Following the Conversion, the remaining shareholder loan balance of USD6 million will remain as a loan payable to its parent company. The company said the terms of the balance of the shareholder loan will not be altered as a result of the conversion.
“This loan is being provided on highly favourable terms, especially when compared with the current lending rates in Nigeria, which allows PZ Cussons Nigeria to maintain manageable financing costs while supporting its operational cashflow”,according to the explanatory note.
Following the Board’s engagement with PZ Cussons Holding, the terms of the Conversion have been approved by the Board and are now being recommended for approval by shareholders at an Extra-Ordinary General Meeting to be held at Transcorp Hilton, FCT, Abuja on Thursday, 13 March 2025 at 11:00am prompt. #PZ Cussons to Convert $34m Debt to Equity for Parent Euro Hits 3-Week High on Fresh Optimism
