Funding arrangements and new joint venture partner

RNS Number : 4474S

Equatorial Palm Oil plc

07 November 2013

 



7 November 2013

EQUATORIAL PALM OIL PLC

("EPO" or the "Company")

Funding arrangements and new joint venture partner and significant shareholder

Funding arrangements

Equatorial Palm Oil PLC (AIM: PAL.L) is pleased to announce that it has entered into various agreements relating to a loan and liability assignment arrangement with Kuala Lumpur Kepong Berhad ("KLK") (the "Agreements"). In addition, KLK has today announced that it has entered into various arrangements with Biopalm Energy Limited ("BEL"), including the proposed acquisition of BEL's 50.0 percent shareholding in Liberian Palm Developments ("LPD") and BEL's 20.1 per cent. interest in the issued ordinary share capital of EPO at a price of 5 pence per ordinary share.

Under the terms of the Agreements, KLK will provide a loan of $2,000,000 to EPO's 50 per cent. owned joint venture company, LPD (the "KLK Loan").

In addition, for a consideration of $2,000,000 payable to the Company, EPO has agreed to assign to KLK $6,000,000 of the outstanding liabilities due to EPO from LPD (the "Assignment")

Simultaneously with the Company entering into the Agreements, EPO has also agreed to provide a loan of $2,000,000 to LPD (the "EPO Loan"). Subsequent to the Assignment and the EPO Loan, the total liabilities owed to EPO by LPD amount to $5,100,000.

Both the KLK Loan and the EPO Loan will have a five year term and will accrue interests at a rate of LIBOR + 4% or 8% per annum, whichever is higher. In respect of both loans, interest will accrue on the principal amount of the loan (including any accrued interest) and is repayable in full at the end of the five year term or earlier, at the discretion of LPD. The KLK Loan and up to $2,000,000 of the Assignment will rank first in priority of payment of the liabilities owed by LPD.

As a result of the EPO Loan and the KLK Loan, EPO and KLK will provide, in aggregate, funds of $4,000,000 to LPD for the continued development of its projects in Liberia. The directors of EPO are pleased to report that this funding will allow LPD to return to normal operations within the next two months.

About KLK

KLK began as a plantations company more than 100 years ago and is now listed on the Main Market of Bursa Malaysia Securities Berhad with a market capitalisation of approximately $7.78 billion (£4.84 billion). Through various strategic acquisitions and sound management, the group's plantation land bank now stands at almost 300,000 hectares, of which 200,000 hectares has been planted with oil palm.

Michael Frayne, Executive Chairman of EPO, commented:

"We are pleased KLK is providing funds to LPD and that EPO has raised additional capital as a result of these Agreements.  This funding will allow our team on the ground in Liberia to recommence normal operations which have been on care and maintenance for the last few months. EPO is totally committed to the development of its Liberian oil palms concessions and enhancing the lives of the communities in which we operate."

KLK agreement with BEL

Separately, KLK has today announced that it has entered into an agreement with BEL for the sale and purchase of the following (the "Proposed Acquisition").

(i)            BEL's 50.0 per cent. equity interest in LPD;

(ii)           BEL's 20.1 per cent. equity interest in EPO, equivalent to 40,260,991 ordinary shares of 1 pence each ("Ordinary Shares"); and

(iii)         the assignment of BEL's loans to LPD totaling $608,000.

The total cash consideration for the Proposed Acquisition is $21,258,000, which is payable as follows:

		$
(i)	50.0 per cent. equity interest in LPD;	17,429,120
(ii)	40,260,991 ordinary shares in EPO, representing 20.1 per cent. of the Company's issued share capital. At a $/£ exchange rate of 1.60, this equates to 5 pence per ordinary share; and	3,220,880
(iii)	the assignment of BEL's loans to LPD totaling $608,000.00	608,000
	Total	21,258,000

The Proposed Acquisition is subject to the satisfaction of certain conditions precedent, which include the corporate approvals of BEL and KLK and the approvals of the relevant governmental/regulatory authorities of Liberia and Mauritius (if required).

KLK expects that the conditions precedent in relation to the Proposed Acquisition will be satisfied within two weeks from today's date.

Offer Update

On 15 October 2013, EPO announced that it was in early stage discussions with KLK regarding the funding of EPO's joint venture, LPD, which may or may not lead to an offer of funding for LPD and which may or may not include an offer for all or part of the Company.  The discussions in relation to a potential offer for EPO are ongoing and a further announcement, if required, will be made in due course.

Related Party Transaction

On the basis that the Proposed Acquisition has not yet been completed, BEL currently holds ordinary shares in EPO representing approximately 20.1 per cent. of the issued ordinary share capital of the Company. BEL currently holds 50 per cent. of the issued share capital of LPD. Accordingly, the EPO Loan is classified as a related party transaction under the AIM Rules for Companies. The independent directors of EPO (being the Board of the Company with the exception of Shankar Varadharajan, a BEL director consider, having consulted with the Company's Nominated Adviser, Strand Hanson Limited, that the terms of the EPO Loan are fair and reasonable insofar as the shareholders of EPO are concerned.

Enquiries:

Equatorial Palm Oil PLC Michael Frayne (Executive Chairman) www.epoil.co.uk	[phone]
Strand Hanson Limited (Nominated Adviser) James Harris / Andrew Emmott	[phone]
Mirabaud Securities LLP (Broker) Peter Krens	[phone]

Strand Hanson Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for EPO and no one else in connection with the possible offer and will not be responsible to anyone other than EPO for providing the protections afforded to clients of Strand Hanson Limited or for providing advice in relation to the possible offer or any other matter referred to herein.

Website disclosure

In accordance with Rule 30.4 of the Code, a copy of this announcement and associated documents will be available on EPO's website at www.epoil.co.uk by no later than 12 noon on 8 November 2013.

 

END

 

 

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