Chrisland Schools Limited has opened up to N2 billion series 4 (Tranche A &B) Commercial Paper issuance for Subscription under its N8 billion Commercial Paper Issuance Programme.
The offer was opened on May 27, 2024, and scheduled to close on 5th June 2024, according to the offer document seen by Nairametrics.
An authorized staff of the company also confirmed the commercial paper.
The 180 days for Tranches A are offered at a discounted rate of 23.8359%-24.6110% and implied yield of 27%-28% while Tranches B with 270 days is offered at a discount rate of 24.5941%-25.2662% and implied yield of 30%-31%.
Nigeria’s benchmark interest rate is currently 26.25% while the inflation rate is around 33.69%.
Risk-free government securities like treasury bills also go for a yield as high as 26%.
The company said that it has successfully repaid all the matured CPs issued under the programme.
Recent Controversies
- Chrisland Schools Limited, incorporated in October 1977, has grown to become one of Nigeria’s largest private educational service providers.
- Fully owned by the Awosika family, the company operates twelve school units across Lagos and Abuja. It is an independent entity, neither part of a corporate group nor possessing any operating subsidiaries.
- The institution has sometimes faced allegations of sexual abuse involving minors amidst other controversies. An allegation, the school has denied severally.
- The government also mandated Chrisland Schools’ management to implement both short-term and long-term reforms in school governance to enhance safety and operational standards.
Capital Raise
Commercial papers are short-term instruments suggesting Chrisland requires the fund to help augment working capital requirements.
- Lead arrangers for the commercial paper is DLM Advisory, a company that helps raise capital for businesses. Rating agency, DataPro assigned an “A2 short term” and “A long term” rating for the CP.
- The funds raised through commercial papers will likely be utilized to acquire modern teaching aids, laboratory equipment, and technology, required for its schools.
- However, the financial burden associated with the high-interest loans might lead the company to pass on the cost to parents by increasing school fees.
- In the current economic climate marked by rising inflation and interest rates, short-term debt financing, such as commercial papers (CPs), has become a commercially prudent strategy for raising cost-efficient capital for periods typically less than a year.
- Commercial papers have also been the most often used route for raising capital by private companies who want to avoid the scrutiny of banks, and their lengthy process and attract higher interest rates.
- The commercial papers could also be used to repay short-term debts.
- In Nigeria, CPs are listed and traded on the FMDQ Exchange platforms. They are usually issued at a discounted rate and are redeemed at face value upon maturity.