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Guinness Nigeria has applied to the Nigerian Stock Exchange for approval to commence a N40 billion rights issue, CardinalStone Partners, a Lagos-based investment advisory firm, said in a note to investors on Wednesday.

In January this year, Guinness Nigeria – which is a subsidiary of British drinks giant, Diageo – obtained shareholder approval to raise funds via a rights issue. The company said it has planned to use the additional funds to deleverage its balance sheet given its relatively high debt level, finance working capital needs, and expand operations.

The rights issue entails 684,494,631 ordinary shares of 50 kobo each at N58 per share on the basis of five new ordinary shares for every 11 ordinary share held by shareholders. The offer price is at a 14.7 percent discount compared to yesterday's closing price and the qualification date for the issue is Wednesday, March 15th.

In October last year, Guinness Nigeria reported its first full-year loss in over 30 years as the country’s deteriorating economic conditions reduced demand for the company’s products. The company said after-tax loss stood at N2.01 billion as against an after-tax profit of N7.79 billion a year earlier. Revenues fell by 14 percent to N101.97 billion compared with N118.5 billion a year earlier.

According to CardinalStone, Diageo plans to use an outstanding foreign currency loan of about N20.3 billion to take up its rights in Guinness Nigeria under a debt/equity swap deal.

“In the event of an under-subscription, Diageo Plc has the opportunity to take-up the rights of other shareholders who did not participate in the offer,” the investment advisory company said.

Guinness Nigeria is the country’s second largest brewer after Nigerian Breweries. The company’s stock closed at N70 per share today, up 2.94 percent from yesterday’s close.