USD$10 million Term Loan Facility Agreement (6486P)
October 06 2011 - 2:00AM
UK Regulatory
TIDMPAL
RNS Number : 6486P
Equatorial Palm Oil plc
06 October 2011
6 October 2011
EQUATORIAL PALM OIL plc
("EPO" or the "Company")
USD$10 million Term Loan Facility Agreement
Equatorial Palm Oil plc, (AIM: PAL), the AIM listed palm oil
development company with operations in Liberia, announces that on 5
October 2011 a group company, Liberian Palm Developments Limited
("LPD"), entered into a loan facility agreement with Geoff Palm
Limited ("GPL"), and Broadcourt Investments Limited ("BIL") (the
"Loan Agreement").
Background
GPL and BIL are companies related to BioPalm Energy Limited
("BPL"), a 26.7% shareholder in EPO. BPL is a member of the Siva
group of companies (the "Siva Group"), with whom EPO's wholly owned
subsidiary, Equatorial Biofuels (Guernsey) Limited entered into a
joint venture agreement in December 2010. It is this joint venture
company, LPD, which has entered into the Loan Agreement.
Under the terms of the Loan Agreement, LPD will provide GPL with
US$10 million for a period of six months (the "Loan"), BIL has
provided certain guarantees to LPD in relation to the Loan, the
details of which are set out below.
Through its wholly owned subsidiary, SPZ Enterprise Pty Limited
("SPZ"), GPL has a large scale oil palm project in Papua New Guinea
("PNG"), an established palm oil producing country, where it has
signed long term leases with the PNG Government (the "Projects").
The Projects cover an area of 110,000 hectares with 89,000 hectares
suitable for the cultivation of oil palm. The Loan, which has been
provided as bridge financing, will allow GPL to accelerate its
planting schedules.
The directors of EPO (the "Board") believe that, in addition to
the potential long term strategic benefits of strengthening the
relationship with BPL and the wider Siva Group, the Loan Agreement
provides LPD with an opportunity to generate a competitive rate of
return on the cash funds held and also provides EPO with exposure
to a major oil palm project outside of West Africa.
Key terms of the Loan Agreement
The key terms of the Loan Agreement are set out below:
-- The Loan is for a 6 month period;
-- Interest on the principal sum will accrue at the greater of
LIBOR plus 4% per annum or 5% per annum and a transaction fee is
payable at the rate of 1% on the Loan;
-- The interest and the principal sum are repayable in one
single payment on the expiry of the 6 month period. However, GPL
may repay the monies prior to this date without penalty;
-- The Loan will be secured by a guarantee provided by BIL. In
addition LPD will be granted a charge over 45% of the shares held
by GPL in the share capital of SPZ; and
-- The Loan Agreement contains various customary
representations, warranties and undertakings from GPL.
In addition to the security granted under the Loan Agreement,
each of LPD and BPL have undertaken that in the event GPL defaults
in repaying the Loan or any other monies payable by it under the
Loan Agreement ("Outstanding Monies") an amount of cash equivalent
to the Outstanding Monies will be transferred to EPO from LPD. In
the absence of sufficient funds being available for transfer, the
Outstanding Monies will be recorded as a debt due and owing by LPD
to EPO.
As a result of the fact that the funds to be advanced under the
Loan Agreement will be provided to a party related to a substantial
shareholder in the Company, the entering into of the Loan Agreement
by the Company constitutes a related party transaction for the
purposes of the AIM Rules for Companies. The independent Directors
of the Company, being the Directors with the exception of Shankar
Varadharajan, who is a Siva Group appointee (the "Independent
Directors") consider, having consulted with Strand Hanson Limited
("Strand Hanson"), the Company's Nominated Adviser, that the terms
of the Loan Agreement are fair and reasonable insofar as the
Company's shareholders are concerned. Strand Hanson has taken into
account the Independent Directors' commercial assessment of the
Loan Agreement.
For further information, please contact:
Equatorial Palm Oil plc +44 (0) 20 7766
Michael Frayne (Chairman) 7555
www.epoil.co.uk
Strand Hanson Limited (Nominated Adviser) +44 (0) 20 7409
James Harris / Paul Cocker 3494
Mirabaud Securities LLP (Broker) +44 (0) 20 7484
Peter Krens 3510
Pelham Bell Pottinger (Financial/ Corporate +44 (0) 20 7861
PR) 3126
Archie Berens / Philippe Polman
This information is provided by RNS
The company news service from the London Stock Exchange
END
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