(Ecofin Agency) - Guinness Nigeria on Wednesday said it is seeking approval from the Nigerian Stock Exchange (NSE) for a share sale operation to raise N39.7 billion ($130 million).

“Our expectation is that this rights issue will help mitigate the impact of increasing finance costs, optimize our balance sheet and improve the company's financial flexibility. We expect that this issue will help us return the company to profitability in the long term,” Peter Ndegwa, chief executive Guinness Nigeria, said.

According to him, the company will issue the shares to existing investors at a price of N58 each and they would be offered five new shares for every eleven old shares held. Guinness Nigeria is held at 54% by Diageo, the world’s leading spirit maker. The company, in September 2016, reported a pre-tax loss of N2.35 billion, its first annual loss in 30 years driven by the economic situation in the country.

Consequently, in October 2016, Diageo abandoned plans to boost its stake in the Nigerian division. It instead granted the unit a $95 million loan to help tackle dollar shortages in the country. So far, Guinness Nigeria had only withdrawn $30 million from the facility. According to Ndegwa, Diageo plans to convert the remaining $65million loan into equity through the rights issue, as it is considered beneficial following the weakening of the naira.

Anita Fatunji