COCOBOD’s first commercial paper offer under its GH¢16.3 billion Cocoa Notes Programme may be used to repay a bridge loan taken out to refinance existing debt, despite being presented to investors as a way to fund cocoa purchases.

The distinction was clear in an investor presentation earlier this month.

Under the overall programme, about GH¢14 billion of short-term commercial paper was earmarked for cocoa purchases, while GH¢2.3 billion of longer-term bonds was earmarked for refinancing existing cocoa obligations.

The presentation did not inform investors that proceeds from commercial paper could be used to repay a bridge facility linked to legacy debt.

The prospectus, provided after the presentation, contains a provision allowing proceeds from commercial paper or bonds to be used first to repay bridge funding obtained before an issuance.

It says such funding must be consistent with the programme’s permitted uses and that its details will be disclosed in the relevant pricing supplement.

Yet the preceding section directs commercial paper proceeds to cocoa purchases and bond proceeds to legacy debt.

That leaves an unresolved question: if commercial paper is intended for cocoa purchases, how would using its proceeds to repay a bridge loan for legacy debt satisfy the prospectus’s restriction on bridge funding?

Then came the September 25 issuance announcement.

It identifies the instrument being offered as 270-day commercial paper and lists two uses for the money raised: financing COCOBOD’s cocoa purchases and repaying a bridge facility obtained to refinance its legacy debt.

That raises a question the documents do not answer: will money raised through this commercial paper issuance be used to pay off a loan for old COCOBOD debt, and if so, how much?

The announcement does not state the size of the bridge facility or the amount to be raised in the first issuance.

The documents reviewed also do not say how much of the proceeds, if any, would go towards repaying the facility and how much would be available to purchase cocoa.

The allocation matters.

COCOBOD’s new domestic financing model is intended to provide cash for seasonal cocoa purchases. If part of the commercial paper proceeds repays a bridge loan for legacy debt, that portion will not provide fresh funding for cocoa purchases. Investors need to know which purpose their money will serve and in what proportions.

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.

Yet the commercial paper announcement also lists repayment of a bridge facility used to refinance legacy debt. The prospectus allows commercial paper proceeds to repay earlier bridge funding, but says that funding must be consistent with the programme’s permitted uses.

COCOBOD has not explained how a bridge loan for old debt fits with its stated purpose for the commercial paper: buying cocoa.

Nor has it disclosed how much of this issuance, if any, would go towards repaying the loan.

With bidding scheduled to open on Monday September 28, COCOBOD and Cocoa Capital need to clarify whether any proceeds from this commercial paper issuance will repay the bridge facility.

If so, they need to disclose the facility’s size, the amount earmarked for repayment and what will remain for cocoa purchases.

JoyNews Research will update this story if COCOBOD provides further details after publication.