REG - Agriterra Ltd - New Trade Finance Package and RPT

AgriterraAnnouncement

18/08/2023 07:00

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RNS Number : 7133J  Agriterra Ltd  18 August 2023

 

The information communicated within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulations (EU) No.
596/2014. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.

 

18 August 2023

Agriterra Limited ('Agriterra' or the 'Company')

Agriterra Limited / Ticker: AGTA / Index: AIM / Sector: Agriculture

 

New Trade Finance Package, Operational Restructure and Related Party
Transaction

 

Agriterra Limited, the AIM-quoted African agricultural company, is pleased to
announce that it has concluded a trade finance package with Magister
Investments Limited ("Magister"), the Company's 50.58 per cent. shareholder,
which will:

 

·    significantly reduce the finance costs associated with maize
purchasing in Mozambique by the Company's wholly owned subsidiary,
Desenvolvemento E Comercializacao Agricola, Limitada ("DECA");

 

·    facilitate the purchase by DECA of various capital equipment which
will be employed by its operations in Mozambique to drive growth through
accessing new revenue streams and improving operational efficiencies; and

 

·    enable the group to replace the external finance provided by First
Capital Bank, S.A. announced on 14 June 2023.

 

In addition, the Company announces that it has implemented a significant
operational cost savings restructure within its Mozambique subsidiaries DECA,
Compagri, Limitada and Mozbife, Limitada (together the "OpCos").

 

Caroline Havers, Executive Chair, said: "The purchasing aspect of our maize
treatment and processing operations in DECA have typically been financed by
local external lending. By securing finance from Magister to purchase maize,
we will significantly reduce our purchasing costs and position DECA to
generate strong revenues from its maize meal sales, during the selling season.
In addition, the new financing will assist in the acquisition of new capital
equipment by DECA and will support ongoing efforts to diversify our product
and revenue streams. This will allow us to access local informal markets, as
we seek to solidify our base of operations. We thank Magister for their
continued support in providing this new financing, which demonstrates their
ongoing commitment to our business and shareholder base.

 

After a period of assessment we have implemented a strategic restructuring to
reduce expenses, maximise efficiencies and improve profitability at our
operations in Mozambique. We are disappointed to have had to reduce our local
workforce so dramatically, but felt that this was the only responsible way to
move forwards in the current economic conditions. We have ensured that all of
those whose employment has ceased have received their full terminal benefits,
in accordance with Mozambique law and thank everyone for their hard work to
date."

 

Summary of Key Terms

 

Agriterra has today secured new debt funding from its majority shareholder,
Magister, in an aggregate amount of US$2.9m together with an extension to the
US$1.8m convertible loan facility provided by Magister (the "2022 CLA") as
announced on 29 July 2022 (together the "Trade Finance Package").

 

The Trade Finance Package comprises:

 

Ø an unsecured facility of US$2m to facilitate onward funding to DECA to
finance grain purchasing in Mozambique without relying on local bank overdraft
facilities, which are typically more expensive (the "Maize Facility");

 

Ø an unsecured facility of US$900k to facilitate the acquisition by DECA of
capital equipment (the "Asset Facility", including an automatic biscuit making
& baking plant, 1kg & 5kg packing machines, a vertical packing machine
for sugar/salt/rice/beans and a FAW 28.380FT truck & 13.5m Tri-Axle
Tautliner semi-trailer, the "Financed Equipment"); and

 

Ø amendments to the 2022 CLA to extend the term and update the interest
provisions (the "CLA Amendment").

 

Agriterra has also carried out a significant operational cost saving exercise,
resulting in a 39% reduction in OpCos staffing, along with new operational
strategies designed to ensure no significant loss in productivity (the
"Mozambique Restructure").

 

Management anticipates that the Mozambique Restructure and the Trade Finance
Package will favourably position DECA to buy maize at competitive prices and
improve maize meal production during the next trading period. Further, the
Financed Equipment will provide access to additional revenue streams and
improve operational efficiencies.

 

The material terms of the Trade Finance Package are as follows:

 

Maize Facility

 

·    Duration of 12 (twelve) months, with principal and interest (as
described below) due at the end of the term, to the extent not converted (as
described below), subject to extension by a further 12 (twelve) months (on one
or more occasions) by notice in writing provided by Magister to the Company at
any time prior to the maturity.

 

·    Magister will have the right on one or more occasions to convert all
or part of the loan then outstanding (plus a pro-rated amount of accrued
interest) into new ordinary shares in the capital of the Company at the
prevailing 10-day VWAP on the date on which notice of exercise of conversion
rights is given to AGTA, subject to all applicable laws and regulations.

 

·    Interest will be charged on this facility at the rate of SOFR (at the
start of each 12 (twelve) month period, if applicable) + 6% per annum (or part
thereof, if applicable), on a daily basis, be compounded quarterly and paid in
full on the maturity date.

 

·    No arrangement fees are payable.

 

·    Upon the occurrence of an event of default, Magister may (the
"Magister Recovery Rights"):

 

Ø declare that the loan (and all accrued interest and all other amounts
accrued or outstanding) is immediately due and payable; and/or

 

Ø at its election, require the Company, using its best endeavours to ensure
that any/all necessary approvals, waivers, consents or similar/equivalent are
obtained, to take all steps necessary to issue new ordinary shares in the
capital of the Company to Magister, equal in value to the loan then
outstanding plus interest calculated at 12% per annum from the date of the
Loan at the 5 day VWAP over the 5 (five) trading days prior to the occurrence
of the event of default.

 

Asset Facility

 

·    Maturity date of 31 March 2026 (subject to extension by a further 12
(twelve) months (on one or more occasions) by notice in writing provided by
Magister to the Company at any time prior to the maturity)

 

·    After a grace period up to 31 March 2024, the Asset Facility will be
repaid in equal quarterly tranches ensuring repayment in full on or before
maturity.

 

·    Interest will be charged on this facility at the rate of SOFR (at the
start of each 12 (twelve) month period, if applicable) + 6% per annum (or part
thereof, if applicable), on a daily basis, be compounded quarterly and paid in
full on or before the maturity date.

 

·    No arrangement fees are payable.

 

·    Upon the occurrence of an event of default Magister will be entitled
to exercise the Magister Recovery Rights.

 

CLA Amendment

 

Magister and the Company agree to various amendments to the 2022 CLA as
follows:

 

·    A change to the definition of the "maturity date" to extend the term
for a further 12 (twelve) months and to provide for extension by a further 12
(twelve) months (on one or more occasions) by notice in writing provided by
Magister to the Company at any time prior to the maturity.

 

·    Changes to the interest charging provisions to the effect that the
interest rate is re-set upon each extension to the prevailing SOFR at
extension, + 6 % per annum.

 

·    Changes to the "restitution amount" (i.e. applicable upon an event of
default) so that the interest rate applied in such circumstances is increased
to 12%, so as to reflect the prevailing worldwide economic conditions and
increased interest costs.

 

The material aspects of the Mozambique Restructure are as follows:

 

·    A broad restructuring plan has been implemented to improve
profitability of the OpCos generally.

 

·    Reduction in the total number of staff as well as certain other
operating expenses.

 

·    A total of 123 out of 312 employees have been retrenched, the
financial impact of which is a reduction of:

 

Ø payroll costs of US$44k (approx.) per month; and

 

Ø other operating expenses of US$19k (approx.) per month.

 

·    Overall anticipated reduction in operating expenses of OpCos by
US$625k (approx.) per year (net of retrenchment costs of US$131k (approx.)
which are planned to be paid over 4-6 months).

 

Related Party Transaction

Entering into the Trade Finance Package, along with the CLA Amendment
constitutes a related party transaction under Rule 13 of AIM Rules. In this
context, Caroline Havers, Neil Clayton and Sergio Zandamela (being the
Directors on the Board who are considered to be independent of Magister)
consider, having consulted with the Company's Nominated Adviser, Strand Hanson
Limited, that the terms of the Trade Finance Package are fair and reasonable
insofar as its shareholders are concerned.

 

 

 

 

 Agriterra Limited                   Caroline Havers

                                     caroline@agriterra-ltd.com (mailto:caroline@agriterra-ltd.com)

 Strand Hanson Limited               Ritchie Balmer / James Spinney
 Nominated & Financial Adviser

                                   +44 (0) 207 409 3494

 Peterhouse Capital Limited          Duncan Vasey / Eran Zucker

 Broker                              +44 (0) 207 469 0930

 

 

 

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