Today Feronia announced that it would be pursuing a two-stage process for the sale or restructuring of its business in the DRC, with a view to securing the long-term future of that business. This involves a sale process and, if that process fails to elicit more favourable offers for the business, a restructuring of the business lead by KKM (an existing shareholder of Feronia).
Since CDC’s initial investment in 2012, Feronia has been brought back from the brink as a company. Palm oil production has increased by over 400 per cent, wages have more than doubled, employee working conditions have been enhanced and housing, educational and medical facilities for local communities have been improved. However, the company still requires extensive investment to become sustainable.
Turning around Feronia’s prospects was always going to be difficult, given the remoteness of its operations and the dilapidated state of its facilities. The significant capital invested since 2013 has been provided against a backdrop of a 30 per cent fall in palm oil prices, which has exacerbated the challenges faced and materially worsened the company’s financial situation.
However we believe that with the progress made to date and with further prudent investment and a recovery in palm oil prices, the company could capitalise on its potential.
As the equal largest shareholder in Feronia, we have been receptive to any financial restructuring proposal that would help to secure the company’s long-term future and be in the best interests of all the company’s stakeholders including the employees, creditors and lenders.
Today’s announcement by Feronia is the first step in that potential restructuring process. As the company’s press release highlights, it is looking to work with its secured lenders to find a way forward and there is no guarantee that restructuring of its current debts to secure further equity investment will be successfully concluded.
KKM is committing to continue the implementation of strong ESG measures and performance that CDC initiated and which form part of CDC’s investment objectives and are also requirements of DFI lenders.
To give the company its best chance for a viable long-term future, CDC is supporting Feronia in this process. CDC has also agreed that its nominees will step back from their roles on Feronia’s Board, and that the KKM appointed Board members and the other remaining independent board members will progress the restructuring negotiations.
CDC is also providing support to the Company on the preparation of its future business plan, particularly in regard to environmental and social aspects. If approved, the restructuring will give the company the opportunity to secure a sustainable future, safeguarding the jobs of thousands of Feronia employees and the economic future of the wider communities that rely on the company for financial support, as well as the provision of medical, educational and other facilities.