Le Lézard
Classified in: Business
Subjects: FINANCING AGREEMENTS, EARNINGS, BOARD OF DIRECTORS, Restructuring / Recapitalization

Feronia Inc. Reports 2019 Financial Results; Announces Short Term Debt Financing, Proposed Restructuring and Director Changes


TORONTO, May 22, 2020 (GLOBE NEWSWIRE) -- Feronia Inc. ("Feronia" or the "Company") (TSX-V: FRN) today released its audited financial results for the year ended December 31, 2019. All amounts in this release are expressed in US dollars unless otherwise indicated. A copy of the audited financial statements of the Company for the year ended December 31, 2019 is available on the Company's profile at www.sedar.com.

2019 Highlights

Subsequent Events

Loan Financing

The Company today also announces that Feronia Maia Srl has entered into a loan facility for up to $15.0 million of which $5.0 million has been advanced. The unsecured subordinated short-term facility bears interest at a rate of 4% per annum and is being provided by an affiliate of one of its principal shareholders, Straight KKM 2 Limited ("KKM"). The loan matures on the earliest of the date that (i) is five business days after demand for repayment by the lender, (ii) the restructuring described below is completed and (iii) the Support Agreement described below is terminated.

Funds advanced under the facility will be used for working capital and other general corporate purposes, whilst the Company seeks to strengthen its financial position.

The execution of the facility constitutes a related party transaction under Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Company has relied on valuation and minority approval exemptions set forth in MI 61-101.

Restructuring

Feronia today also announces that the Company and each of its subsidiaries has entered into a Support Agreement with its two largest shareholders, KKM and CDC Group plc. ("CDC"). The Support Agreement sets out an agreement amongst the parties whereby the Company will first engage an independent financial advisor to conduct a third-party sale process for the Company and its assets. If the sale process does not result in a transaction which is more favourable to the Company and its stakeholders, the parties have agreed for the Company to initiate a proceeding pursuant to Division I, Part III of the Bankruptcy and Insolvency Act (Canada) (the "Proposal Proceedings") to implement the purchase by a newly formed affiliate of KKM of all of the outstanding shares and intercompany loans of the Company's two subsidiaries in consideration of the assumption of the obligations owing to the Company's senior lenders and the payment of the costs of the Proposal Proceedings. As a condition of such purchase, KKM will provide a binding commitment of a further $10 million investment to fund the Company's operating subsidiary in the Democratic Republic of the Congo, Plantations et Huileries du Congo. The restructuring purchase will be subject to various conditions and necessary approvals including court approval, governmental and regulatory approvals in Canada, Belgium and the Democratic Republic of the Congo and approvals of the Company's secured debt lenders. There is no assurance that the sale process or the proposed restructuring purchase will be completed or, if completed, that it will be on the terms set out above.

Board of Director Changes

The Company today announces that Mr. Larry Seruma, currently a non-executive director of the Company, has been appointed as Executive Chairman of the Company. Mr. David White, a current non-executive director and Chairman of the Audit Committee of the Company, has resigned and, in replacement, Mr. Paul Wythe has been appointed as a non-executive director and Chairman of the Audit Committee. In accordance with the terms of the Support Agreement, CDC has agreed to suspend its existing rights to nominate directors to the Board during the restructuring period and, as a result, Mr. David Osborne and Mr. Andrew Brown have also resigned as directors. Finally, Mr. Kamal Pallan has been appointed to join the Board as a further non-executive director nominee of KKM. The appointments of Messrs. Wythe and Pallan are subject to the approval of the TSX Venture Exchange.

Larry Seruma, Executive Chairman of Feronia Inc. commented: "Depressed market prices, extremely challenging operating conditions and delays in the execution of capital projects mean that a great deal of work is required to ensure the survival of the business.

"In the longer term, it is vital that we reduce the cost of production and the completion of capital projects, such as the construction of the Lokumete mill, are essential to achieve this. However, as the Company cannot meet its debt repayment requirements or remedy the current debt-related defaults, a great deal of work and compromise will be required to restructure the Company's debts, or find an alternative solution, in order to ensure there is a "longer term".

"As such, we are in discussions with the Company's secured debt holders to find a way forward and have entered into a support agreement with the Company's two largest shareholders to facilitate the Group's restructuring. Additional debt financing from one of the Company's principal shareholders, of which $5 million has already been funded, is in place to help fund the Company whilst the restructuring process takes place and we are working hard to find a way forward.

"Plantations et Huileries du Congo is one of the largest private sector employers in the Democratic Republic of the Congo and has played a vital role as an employer and provider of palm oil for more than 100 years. Through the combined efforts and desire of all of its financial stakeholders, we hope this will continue long into the future."

For further information please contact:

Larry Seruma
Executive Chairman, Feronia Inc.
[email protected]
www.feronia.com
Paul Dulieu
Director of Communications and Corporate
Development, Feronia Inc.
+44 (0)7554 521421
[email protected]
www.feronia.com

About Feronia Inc.

Cautionary Notes

Except for statements of historical fact contained herein, the information in this press release constitutes "forward-looking information" within the meaning of Canadian securities law. Such forward-looking information may be identified by words such as "anticipates", "plans", "proposes", "estimates", "intends", "expects", "believes", "may" and "will". There can be no assurance that such statements will prove to be accurate; actual results and future events could differ materially from such statements. Factors that could cause actual results to differ materially include, among others: risks related to foreign operations (including various political, economic and other risks and uncertainties), the interpretation and implementation of the "Loi Portant Principes Fondamentaux Relatifs A L'Agriculture", termination or non-renewal of concession rights or expropriation of property rights, political instability and bureaucracy, limited operating history, lack of profitability, lack of infrastructure in the DRC, high inflation rates, limited availability of debt financing in the DRC, fluctuations in currency exchange rates, competition from other businesses, reliance on various factors (including local labour, importation of machinery and other key items and business relationships), the Company's reliance on one major customer, lower productivity at the Company's plantations and arable farming operations, risks related to the agricultural industry (including adverse weather conditions, shifting weather patterns, and crop failure due to infestations), a shift in commodity trends and demands, vulnerability to fluctuations in the world market, the lack of availability of qualified management personnel and stock market volatility. Details of the risk factors relating to Feronia and its business are discussed under the heading "Risks and Uncertainties" in Feronia's management's discussion and analysis for the year ended December 31, 2019, a copy of which is available on the Company's SEDAR profile at www.sedar.com. Most of these factors are outside the control of the Company. Investors are cautioned not to put undue reliance on forward-looking information. Except as otherwise required by applicable securities statutes or regulation, the Company expressly disclaims any intent or obligation to update publicly forward-looking information, whether as a result of new information, future events or otherwise.

The Company now reports EBITDA (earnings before deducting interest, taxes, depreciation and amortization) and EBITDA per share as, whilst both are non-GAAP measures, the Company believes that EBITDA is useful additional information to management, the Board and investors as it provides an indication of the operational results generated by its business activities prior to taking into consideration how those activities are financed and taxed and also prior to taking into consideration asset depreciation and amortization and it excludes items that could affect the comparability of our operational results and could potentially alter the trends analysis in business performance. Excluding these items does not necessarily imply they are nonrecurring, infrequent or unusual. EBITDA is also used by some investors and analysts for the purpose of valuing a company. Investors are cautioned that EBITDA should not be construed as an alternative to operating earnings or net earnings determined in accordance with IFRS as an indicator of the Company's financial performance or as a measure of the Company's liquidity and cash flows. EBITDA does not take into account the impact of working capital changes, capital expenditures, debt principal reductions and other sources and uses of cash, which are disclosed in the consolidated statements of cash flows.

Neither the TSX Venture Exchange nor its regulation services provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.


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