COCOBOD Commercial Paper Use Under Scrutiny | COCOBOD’s first commercial paper offer under its GH¢16.3 billion Cocoa Notes Programme has raised questions over how the funds will be used. The 270-day commercial paper is presented as a source of financing for cocoa purchases. However, the offer also allows proceeds to repay a bridge facility used to refinance COCOBOD’s existing debt.
The distinction matters because the programme sets out different purposes for its financing instruments. According to an investor presentation issued earlier this month, COCOBOD earmarked about GH¢14 billion of short-term commercial paper for cocoa purchases. It also allocated GH¢2.3 billion of longer-term bonds to refinance existing cocoa obligations.
However, the presentation did not tell investors that commercial paper proceeds could also repay a bridge facility linked to legacy debt. The programme prospectus provides further detail. It allows proceeds from commercial paper or bonds to repay bridge funding obtained before an issuance. However, the prospectus says such funding must comply with the programme’s permitted uses. Meanwhile, another section directs commercial paper proceeds towards cocoa purchases. It assigns bond proceeds to the refinancing of legacy debt.
The September 25 issuance announcement then introduced another element. It identifies the first offer as 270-day commercial paper and lists two uses for the funds. One is financing COCOBOD’s cocoa purchases. The other is repaying a bridge facility obtained to refinance legacy debt. That creates uncertainty over the actual allocation of the funds.
The documents reviewed do not disclose the size of the bridge facility. They also do not state how much COCOBOD plans to raise through the first issuance.
More importantly, they do not specify how much of the proceeds could go towards debt repayment and how much would remain for cocoa purchases. This allocation is significant for investors. COCOBOD’s new domestic financing model aims to provide funding for seasonal cocoa purchases. Therefore, any portion used to repay a bridge loan would not provide fresh financing for cocoa buying.
Investors consequently need clear information about the intended use of their funds. COCOBOD spokesperson Jerome Sam told JoyNews Research that the commercial paper is intended to finance cocoa purchases. He said bonds, meanwhile, would refinance legacy debt.
However, the commercial paper announcement also identifies repayment of the bridge facility as one of its uses. The prospectus permits commercial paper proceeds to repay earlier bridge funding, provided that the funding meets the programme’s permitted-use requirements. COCOBOD has not explained how the bridge facility for legacy debt fits within the stated purpose of the commercial paper.
The cocoa sector financier has also not disclosed the amount, if any, that could go towards repaying the facility. With bidding scheduled to open on Monday, September 28, COCOBOD and Cocoa Capital face calls for greater clarity. They need to disclose whether the first commercial paper issuance will repay the bridge facility. If so, they should also state the facility’s size, the amount earmarked for repayment and the balance available for cocoa purchases.
COCOBOD Commercial Paper Use Under Scrutiny | AviationGhana
