Market | Bonds & Fixed Income

Ardova Plc and Its N25.3bn Series 1 Bond: The Real Issues

Aug 08, 2022   •   by TheAnalyst, Proshare Research   •   Source: Proshare   •   eye-icon 428 views

On 16 November 2021, Ardova announced the successful completion of a N25.3bn series 1 Fixed Rate Senior Unsecured Bond Issue under its N60bn Debt Issuance Programme. Although the series was completed in 2021, disclosure issues seem to have brought the Bond issuance programme to public discussion. 

The media report showed a rising concern about the diversion of proceeds from the 2021 bond programme largely due to the current owners' outstanding payment from the acquisition of Forte Oil Plc from Zenon Petroleum and Gas Limited. Zenon Petroleum and Gas Limited filed a lawsuit against Prudent Energy and Services Limited, the current owner of the Forte Oil (now called ARDOVA), over the latter’s inability to repay a debt of US$6m in concerning equities sales conducted between both parties in 2018. 

Proshare analysts observed that the broader conversation should be to clarify the stated use of the proceeds from the bond programme. It is by understanding what each use really meant that analysts can objectively examine the claim that the proceeds of the bond issuance had been diverted to other uses. 

According to the details of the Bond Programme, there were four (4) published uses for the bond proceeds: (I) Retail expansion projects, (II) Working capital requirements. (III) Upgrade of existing infrastructure, and (IV) Provision for debt service reserve account funding. The treatment of each item highlighted would not be in the same category of funds in ARDOVA’s statement of financial position or balance sheet. Thus, lumping the items together under expansion projects and working capital requirements may create a challenge in understanding the real purpose of the use of funds. 

Proshare analysts have written to Prudent Energy and Services Limited to provide further insight into the utilization of the Bond Issuance proceeds to form an objective basis for analysts’ opinion and market communication. Meanwhile, for the balance of the purchase consideration, Proshare is contacting Zenon Petroleum and Gas Limited to provide more insight into the outstanding consideration and other issues around the 2018 transaction. 

See links below for media concerns:

  1. Ardova may see ‘Sell’ as Zenon battles Prudent Energy over N2.6bn debt
  2. Zenon Petroleum Petitions Court to Wind Up Ardova Plc over $6m Debt
  3. Prudent Energy, owners of Ardova Petroleum face winding up charges

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