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Feronia Inc (2)
Symbol FRN
Shares Issued 55,205,051
Close 2015-01-16 C$ 0.45
Market Cap C$ 24,842,273
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Feronia arranges $16.32-million (U.S.) debt financing

2015-01-22 08:07 ET - News Release

Mr. Ravi Sood reports

FERONIA INC. ANNOUNCES SECURED CONVERTIBLE DEBENTURE FINANCING OF UP TO US$16.325 MILLION LED BY CDC, THE UK GOVERNMENT'S DEVELOPMENT FINANCE INSTITUTION

Feronia Inc. has entered into subscription agreements for a private placement of up to $16,325,000 (U.S.) of secured convertible debentures led by CDC Group PLC, the U.K. government's development finance institution.

Proceeds from the offering, which was unanimously agreed by Feronia's board of directors, shall be used for working capital purposes and, in particular, to provide expansion capital for the company's subsidiaries in Congo.

It is expected that a first tranche of $7.15-million (U.S.) will close today. In the first tranche, CDC has agreed to subscribe for $7,078,500 (U.S.) principal amount of debentures. Ravi Sood, Feronia's chairman, has agreed to subscribe for the remaining $71,500 (U.S.). Subsequent tranches of the offering will close at the option of the majority holders of the debentures and upon the meeting of certain conditions. Each of the subscribers of the debentures shall receive a 2-per-cent placement fee on the amount of debentures purchased. Mr. Sood has elected that the placement fee of $1,430 related to his subscription be used to purchase educational supplies for schools on the company's plantations.

The Canadian-dollar equivalent of the principal amount of the debentures is convertible into units of the company at a rate of 80 cents per unit. Each unit consists of one common share in the capital of the company and one transferable common share purchase warrant. Each warrant shall be exercisable into one common share at an exercise price of 80 cents per share for a period of five years from the closing date of the first tranche of the offering. If the company does not complete a qualifying debt financing (as such term is defined in the debentures) prior to Sept. 30, 2015, the conversion price of the debentures shall be reduced to 45 cents per unit and the exercise price of the warrants shall be reduced to 45 cents per share.

Interest on the debentures shall be 12 per cent per year, compounded semi-annually, and shall accrue and be payable upon maturity, unless converted earlier. A minimum of one year's interest shall accrue on the first tranche of debentures, regardless of when such debentures are repaid or converted. The interest payable on a subsequent closing of debentures shall be a minimum of the interest for the portion of the fiscal quarter up to the date that such subsequent debentures are repaid or converted plus interest for one additional fiscal quarter. Notwithstanding the foregoing, the guaranteed interest provisions above shall not apply if the qualifying debt financing is not completed by Sept. 30, 2015. Upon conversion, the Canadian dollar equivalent of the accrued interest on the debentures shall, subject to the approval of the TSX Venture Exchange, be convertible into common shares at a per share price equal to the greater of 80 cents and the discounted market price (as defined in the policies of the TSX-V) at the time of conversion. If the qualifying debt financing is not completed by Sept. 30, 2015, the interest on the debentures shall convert at a price equal to the greater of 45 cents and the discounted market price of the common shares at the time of conversion.

The debentures will mature and convert one year from the closing of the first tranche of the offering. At any time prior to maturity, the debentures may be converted at the option of the holder. The debentures shall automatically convert in the event that the company draws down on a qualifying debt financing. The debentures shall be secured by way of a pledge by the company of the outstanding shares of its wholly owned Cayman Islands subsidiary, Feronia CI Inc.

Xavier de Carniere, chief executive officer of Feronia, commented: "Having recently joined as chief executive officer, I am impressed by the progress Feronia has made in the rehabilitation of its 104-year-old palm oil business.

"I know from experience that whether you are establishing or rehabilitating a palm oil business, it is a capital-intensive process. Money invested in planting palms shows little in the way of a return in the first few years and, during this time, the palms must be maintained. Since it acquired the business in 2009, the company has replanted 17,000 hectares of oil palm which has been a considerable phase of agricultural investment, the likes of which has seldom been seen in Africa before.

"As a company, we are now entering a new phase and need to put in place the right structure to gain maximum advantage from the work that has been done to date. In this regard, shareholders have demonstrated their continued commitment to the long-term goal of restoring this 104-year-old business to its status as the largest producer of palm oil in Africa."

Nigel Gourlay, independent non-executive director of Feronia, added: "I would like to thank CDC on behalf of all the independent directors for its decision to provide this important financing, which comes at a critical time for the business. Having the support of patient investors such as CDC allows us to continue to rehabilitate old plantations, boost production and return them to profitability.

"We are working to put in place long-term financing arrangements appropriate for the increasingly mature nature of the business. Until that process is concluded, the continued support of our key shareholders to provide ongoing funding is, we believe, a positive for all shareholders. We thank them for their continued support."

David Easton, investment director, equity investments, CDC Group, said: "The additional financing being provided by CDC will allow Feronia to build on what they have already achieved, generating and sustaining new growth, jobs and investment in the DRC. CDC continues to work closely with Feronia to ensure it has access to the capital and support it needs as it executes on its ambitious plan to rehabilitate its plantations. Agribusiness is a priority sector for CDC and this facility is an important step in Feronia's long-term financing."

The company also announces that it has granted 1,104,400 deferred share units to Mr. de Carniere. Under the terms of the company's deferred share unit plan, 552,200 of the DSUs granted vest in four equal instalments on the first day of January, 2017, 2018, 2019 and 2020. Up to an additional 138,050 DSUs may vest on each vesting day subject to achieving certain performance targets. The full text of the DSU plan is set out in the company's management information circular dated May 7, 2014, which is filed under the company's SEDAR profile. The DSU plan is intended to enhance the company's ability to attract and retain talented individuals to serve as directors, officers and employees by allowing such individuals to participate in the long-term success of the company and to promote a greater alignment of interests between such individuals and the shareholders of the company.

We seek Safe Harbor.

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