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news - New owner and debt restructuring avert bankruptcy for Plantations et Huileries du Congo

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New owner and debt restructuring avert bankruptcy for Plantations et Huileries du Congo

July 21, 2020

The largest palm plantation company in the Democratic Republic of Congo (DRC), Plantations et Huileries du Congo S.A. (PHC) will get a new owner by 7 September 2020. This change is part of a restructuring plan to save PHC from bankruptcy. As the single source of employment, healthcare, and infrastructure in remote areas of the DRC, preserving the company is crucial for the communities depending on it.

Feronia Inc (Feronia) is an agribusiness company listed on the Canadian stock market and has agreed to sell its equity interest in its operating subsidiary in PHC, to Straight KKM 2 Ltd. (KKM), a long-term shareholder in Feronia. British development bank CDC will no longer be a shareholder but will remain on board as a lender, while existing shareholder KKM will become the majority shareholder. The government of DRC stills remains an important shareholder in PHC.

PHC has been making losses for several years due to unfavourable palm oil prices, a need for operational improvements and a very challenging operating environment. Over the last few years, the two major shareholders of Feronia - the British development bank CDC and KKM - have provided financial and non-financial support to keep the company operational.

It has now become clear that both PHC’s operations as well as its balance sheet need to be restructured for the company to remain viable. This requires a commitment of USD 10 mln additional equity and a significant reduction of outstanding debt. As one of the lenders to PHC, FMO was consulted in making a debt restructuring plan which preserves as much local employment as possible.

For FMO it was particularly important that the following conditions were included in the debt restructuring plan:

  • The ongoing Independent Complaints Mechanism (ICM) mediation process, for those communities that have expressed concerns about PHC, continues with the support of KKM, CDC, DEG, BIO and FMO.
  • ESG (Environmental, Social and Governance) spending, and ongoing improvement of and attention for ESG standards - to improve working conditions, enhance the local environment and provide education and medical facilities - will be maintained by KKM and be independently audited to ensure agreements made are seen through.
  • KKM will inject the necessary capital to keep PHC operational on the short term and it will improve PHC’s operations to make it more financially sustainable.

These conditions have been included and agreed by all parties involved. Although the debt restructuring plan will incur losses on our investment, FMO is relieved that immediate bankruptcy is avoided and that ESG-related agreements can be seen through.

KKM will continue the conversations with the local communities in Boteka, Yaligimba and Lokutu and is committed to further improve PHC’s Environmental and Social standards. As before, progress will continue to be audited on an annual basis by an independent E&S advisor, commissioned by the lenders.

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