RNS Number : 1500A
R.E.A.Hldgs PLC
29 July 2008
Proposed creation and issue of further debt securities by REA Finance B.V. (the "issuer"),
a wholly owned subsidiary of R.E.A. Holdings
plc (the "company")
Introduction
It was announced on 7 July 2008 that the issuer was contemplating the creation and issue
of further notes ("further notes") ranking pari
passu with and forming a single series with the £22,000,000 nominal of 9.5 per cent
guaranteed sterling notes 2015/17 of the issuer that are
already in issue ("original notes")
The company and the issuer now announce that they have today published a prospectus (the
"prospectus") relating to a proposed issue of
up to £28,000,000 nominal of further notes of which it is proposed that an initial tranche of
up to £15,000,000 nominal of the further notes
be issued for cash at 99.8682 per cent of par and that the balance be available for issue
pursuant to an offering programme.
The original notes are constituted by a trust deed dated 1 December 2006 made between the
issuer (as Issuer), the company (as Guarantor)
and Capita Trust Company Limited (as Trustee), as amended by a first supplemental trust deed
dated 6 August 2007 made between the same
parties (the "original trust deed"). In connection with the issue of the further notes, it is
proposed that the original trust deed be
amended in certain respects and restated so that the original and further notes will in future
be constituted by an amended and restated
deed (the "amended and restated trust deed"). Such amendment and restatement will require the
sanction of existing holders of the original
notes and the issuer has today despatched to holders of the original notes a notice convening
a meeting of such holders to be held at the
registered office of the issuer in Amsterdam on 21 August 2008 to consider a resolution to
provide the necessary sanction and, at the same
time also to sanction proposed amendments to the terms of a loan agreement (the "REA Kaltim
loan agreement") between the issuer, PT REA Kaltim Plantations ("REA Kaltim", a subsidiary of
the company)
and the company relating to loans that currently form the principal security for the original
notes. The notice of meeting is accompanied by
an explanatory circular from the company (together with the notice, the "circular").
Purposes of the proposed issue
The company and its subsidiaries (the "group") currently have substantial cash resources
but the extent of their liquidity reflects
delays to the 2007 planned development programme that meant that development expenditure
during 2007 was lower than it would have been had
the development programme proceeded as intended. Following the resumption of extension
planting in May 2008, the group is aiming to plant
some 18,000 hectares of additional land over the period to 31 December 2009. This will involve
the group in major development expenditure.
At the current level of prices for crude palm oil ("CPO"), the group's operating
activities are producing significant positive cash
flows. If maintained, these cash flows, coupled with the cash resources already held by the
group, could be expected to fund a substantial
proportion, if not all, of the development expenditure currently planned. However, as there
can be no certainty that the group will continue
to enjoy revenues from its CPO sales at current levels, the directors feel that, in committing
the group to new development, they should
endeavour to ensure that the group maintains cash reserves that can reasonably be expected to
be sufficient to complete all works associated
with the development in the event that the cash flows projected to be available from
operational activities do not fully materialise.
This means that, notwithstanding its existing liquidity, the group will require additional
funding. The proposed issue of further notes
is designed to meet that requirement as currently estimated on the basis of the group's
existing development programme.
Particulars of the further notes
The further notes will be issued by the issuer and unconditionally and irrevocably
guaranteed by the company. All proceeds from the
issue of the further notes will be applied in making loans to REA Kaltim and/or other
subsidiaries of the company incorporated in Indonesia
and engaged in the cultivation of oil palms and/or the processing of oil palm fruit.
The further notes will be in registered form in amounts and integral multiples of £1,000
and will be listed on the Official List and
traded on the Regulated Market of the London Stock Exchange. The further notes will bear
interest at the rate of 9.5 per cent per annum
payable semi-annually in arrear on 30 June and 31 December of each year, save that interest
for the period from the date of issue of each
tranche of further notes to the next following 30 June or 31 December will be calculated as if
such interest had accrued for a full six
month period.
Unless previously redeemed or purchased and cancelled by the issuer, the further notes and
the original notes (together the "sterling
notes") will be redeemed at par by three (as nearly as possible) equal annual instalments
commencing 31 December 2015. If sterling notes
have been purchased by the issuer and cancelled, the amount of sterling notes that the issuer
will be obliged to redeem on any given
redemption date will be reduced by the nominal amount of sterling notes purchased and
cancelled prior to that redemption date (save in so
far as such notes were purchased and cancelled prior to a previous redemption date and taken
into account in reducing the sterling note
redemption requirement in relation to that previous redemption date).
The original notes are, and the further notes will be, secured by way of a first charge
over any cash balances held from time to time by
the issuer at bank and all rights of the issuer in respect of all loans owed from time to time
to the issuer by Indonesian subsidiaries of
the company ("Indonesian debtor subsidiaries"). Following completion of the issue of the
initial tranche of the further notes and the
on-lending of the gross proceeds of that issue to Indonesian subsidiaries of the company,
those loans will comprise sterling denominated
loans of £22,385,000 plus such on-lent gross proceeds and dollar denominated loans of
$36,500,000. All loans owed by the Indonesian debtor
subsidiaries to the issuer will be unsecured obligations of those subsidiaries.
Under the terms of the amended and restated trust deed, the company will be obliged to
procure that the combined borrowings (net of cash
balances) of the Indonesian debtor subsidiaries and the issuer do not exceed an agreed limit.That limit is currently $114,402,000 but will
be increased on a formula basis if operating cash flows from REA Kaltim increase. External
borrowings will include the principal amount of
the sterling notes, converted into dollars at the spot rates applicable on the dates of issue
of the notes, but will exclude (i) monies owed
by the issuer to the company or any subsidiary of the company; (ii) monies owed by the
Indonesian debtor subsidiaries to the issuer and each
other; and (iii) external borrowings of up to $10 million incurred for the purposes of
repaying then existing external borrowings.
Subject to the limit on the combined borrowings of the issuer and the Indonesian debtor
subsidiaries and a limit on the combined secured
indebtedness of the Indonesian debtor subsidiaries of $55,000,000, the Indonesian debtor
subsidiaries will be free to continue existing,
and/or enter into new, external borrowing arrangements that are secured. The issuer and REA
Kaltim have entered into, and the issuer and
Indonesian debtor subsidiaries may enter into, subordination arrangements which subordinate
obligations owed or to be owed by REA Kaltim and
other Indonesian debtor subsidiaries to the issuer to other obligations of the applicable
Indonesian debtor subsidiaries (including
obligations under hedging contracts). The issuer will not be permitted to create security over
its assets (save for the security described
above in relation to the sterling notes).
The amended and restated trust deed will not contain any provisions limiting the
indebtedness of, or imposing financial covenants on,
the company.
The issuer will be free to receive and retain and/or expend monies received in respect of
its loans to the Indonesian debtor
subsidiaries unless and until the security for the sterling notes becomes enforceable, subject
always to restrictions on the use of such
monies contained in, and continued compliance with the covenants imposed by, the amended and
restated trust deed.
If any person or group of persons acting in concert acquires shares in the company
carrying more than 50 per cent of the votes which may
generally be cast at general meetings of the company, each holder of sterling notes will have
the right to require that the sterling notes
held by such holder be repaid at 101 per cent of par together with accrued interest.
Placing of the further notes
The issuer and the company have entered into a placing agreement with Guy Butler Limited,
whereby the latter has undertaken to use its
reasonable endeavours to place (as agent of the issuer) the initial tranche of up to
£15,000,000 nominal of the further notes at a
subscription price of 99.8682 per cent of par (including 1.3682 per cent representing deemed
accrued interest), payable in full on
allotment. Such placing is conditional upon the creation of the further notes and the
admission of the further notes placed to the Official
List and to trading on the Regulated Market of the London Stock Exchange by no later than 26
September 2008.
Conditions
The creation of the further notes is conditional upon:
* the passing of the resolution set out in the notice of meeting of holders of
original notes convened for 21 August 2008 as
contained in the circular;
* receipt of any necessary consents from the Treasury pursuant to section 765 of the
Income and Corporation Taxes Act 1988 of the
United Kingdom as respect loans proposed to be made by the issuer;
* the execution by the parties thereto of a second supplemental trust deed amending
and restating the original trust deed;
* the execution by the parties thereto of a Dutch law deed of pledge of receivables
and an Indonesian law fiduciary assignment of
receivables, creating the further security for the sterling notes;
* the exchange between the parties thereto of a letter amending the terms of the REA
Kaltim loan agreement as to be sanctioned by
the resolution of the holders of the original notes referred to above; and
* the receipt by Capita Trust Company Limited, as trustee for the holders of the
sterling notes, of Dutch law and Indonesian law
legal opinions and directors' certificates (each in form and substance satisfactory to Capita
Trust Company Limited).
Further information
Copies of the circular and the prospectus will be available for inspection at the Document
Viewing Facility of the UK Listing Authority
and may be obtained free of charge from the company at its registered office, First Floor,
32-36 Great Portland Street, London W1W 8QX.Copies of the circular and prospectus are also available from the company's website at
www.rea.co.uk and the prospectus may be downloaded by
pasting the following link into a web browser:
http://www.rns-pdf.londonstockexchange.com/rns/1500A_-2008-7-29.pdf
Expected timetable
It is expected that the results of the proposed placing of the initial tranche of further
notes will be announced on 21 August 2008 and
that dealings in the fully paid notes issued pursuant to the placing, for normal settlement,
will commence on 22 August 2008.
Enquiries
Richard Robinow
R.E.A. Holdings plc
Tel: 020 7436 7877
This information is provided by RNS
The company news service from the London Stock Exchange
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