Chrisland Schools Limited has launched a N2 billion Series 4 (Tranche A & B) Commercial Paper issuance under its N8 billion Commercial Paper Issuance Programme.
The offer, which opened on May 27, 2024, is scheduled to close on June 5, 2024, according to documents seen by Nairametrics. An authorized company representative has also confirmed the issuance.
For Tranche A, with a 180-day term, the discount rate is 23.8359%-24.6110%, translating to an implied yield of 27%-28%. Tranche B, with a 270-day term, has a discount rate of 24.5941%-25.2662% and an implied yield of 30%-31%.
Meanwhile, Nigeria’s benchmark interest rate stands at 26.25%, and the inflation rate is about 33.69%. Risk-free government securities like treasury bills offer yields as high as 26%. Chrisland Schools has successfully repaid all previous commercial papers issued under this programme.
Founded in October 1977, Chrisland Schools Limited has grown to be one of Nigeria’s largest private educational providers. Fully owned by the Awosika family, the company operates twelve school units across Lagos and Abuja. It is an independent entity, not part of any corporate group and without any subsidiaries.
Despite its success, the institution has faced allegations of sexual abuse involving minors, which it has consistently denied. The government has required Chrisland Schools to implement both short-term and long-term reforms to enhance safety and operational standards.
Commercial papers are short-term debt instruments indicating that Chrisland needs funds to support working capital requirements. The lead arranger for this issuance is DLM Advisory, a firm that assists businesses in raising capital. Rating agency DataPro has given the commercial papers an “A2 short-term” and “A long-term” rating.
The proceeds from the commercial papers are expected to be used to acquire modern teaching aids, laboratory equipment, and technology for the schools.
However, the financial burden of high-interest loans may result in increased school fees for parents. In the current economic climate, characterized by rising inflation and interest rates, short-term debt financing through commercial papers has become a prudent strategy for raising cost-efficient capital for periods typically less than a year.
Commercial papers are a popular method for private companies to raise capital, as they avoid the scrutiny and lengthy processes associated with banks and offer higher interest rates. In Nigeria, these instruments are listed and traded on the FMDQ Exchange platforms, issued at a discount, and redeemed at face value upon maturity.
