COCOBOD, Ghana's cocoa regulatory body, has launched a GH¢16.3 billion Cocoa Notes Programme to secure funding for cocoa purchases and refinance existing debt. The programme includes a GH¢14 billion short-term commercial paper and a GH¢2.3 billion longer-term bond. According to an investor presentation, the commercial paper will be used for cocoa purchases, while the bond will refinance legacy debt. However, the presentation did not clearly disclose that proceeds from commercial paper could also be used to repay a bridge facility linked to legacy debt.
The GH¢16.3 billion programme was established under Cocoa Capital PLC, a new entity set up by COCOBOD to raise funds for the cocoa sector. The commercial paper offer is part of COCOBOD's new domestic financing model aimed at providing cash for seasonal cocoa purchases. However, concerns have arisen over the use of proceeds from the commercial paper issuance. An announcement on September 25 stated that the 270-day commercial paper would be used to finance COCOBOD's cocoa purchases and repay a bridge facility obtained to refinance its legacy debt.
COCOBOD spokesperson Jerome Sam told JoyNews Research that the commercial paper is intended to fund cocoa purchases, while bonds are intended to refinance legacy debt. However, the prospectus for the programme allows commercial paper proceeds to repay earlier bridge funding, provided it is consistent with the programme's permitted uses. The details of the bridge facility, including its size and the amount to be raised in the first issuance, have not been disclosed.
Investors are seeking clarity on the use of proceeds from the commercial paper issuance, as it may impact the amount available for cocoa purchases. If part of the commercial paper proceeds repay a bridge loan for legacy debt, that portion will not provide fresh funding for cocoa purchases. COCOBOD and Cocoa Capital need to clarify whether any proceeds from this commercial paper issuance will repay the bridge facility and disclose the facility's size and the amount earmarked for repayment.
The allocation of funds from the commercial paper issuance is crucial, as COCOBOD's new domestic financing model aims to provide cash for seasonal cocoa purchases. The programme's success depends on transparent disclosure of the use of proceeds and the amount available for cocoa purchases. Failure to provide clear information may affect investor confidence and the programme's overall success.
COCOBOD's debt profile has been a concern, with the Chamber of Cocoa Marketers warning that COCOBOD's GH¢4 billion debt could disrupt cocoa purchases in the new season. The company's ability to secure funding for cocoa purchases and refinance legacy debt is critical to the Ghanaian cocoa industry's stability. The outcome of this funding programme will have implications for the sector and the country's economy.
As bidding for the commercial paper issuance opens, COCOBOD and Cocoa Capital must provide clear information on the use of proceeds and the amount available for cocoa purchases. JoyNews Research will update this story if COCOBOD provides further details after publication. The programme's success depends on transparent disclosure and effective management of funds to achieve its intended purposes.
Key points
- COCOBOD's commercial paper issuance may be used to repay a bridge loan for legacy debt, in addition to funding cocoa purchases.
- The programme's prospectus allows commercial paper proceeds to repay earlier bridge funding, but details of the bridge facility have not been disclosed.
- Investors seek clarity on the allocation of funds from the commercial paper issuance to ensure transparent disclosure and effective management of funds.
