Liberia-focused Equatorial Palm Oil (LON:PAL) announced today that its subsidiary, Liberian Palm Developments, has agreed a US$10 million loan facility with two firms connected to India’s Siva Group in a deal that will see the company gain exposure to a major palm oil project in Papua New Guinea.
LPD has made the arrangement with Geoff Palm and Broadcourt Investments. Both of these firms are related to the Siva-owned BioPalm Energy – which itself has a 26.7 per cent shareholding in Equatorial Palm Oil as well as a joint venture agreement with Equatorial’s subsidiary Equatorial Biofuels.
The deal will see LPD provide Geoff Palm with US$10 million for a period of six months, while Broadcourt has provided guarantees to LPD in relation to the loan. Interest on the principal sum will accrue at the greater of LIBOR (the London Interbank Offered Rate) plus four per cent per annum or five per cent annum, while a transaction fee is payable at the rate of one per cent on the loan.
Geoff Palm has a large scale oil palm project in Papua New Guinea – and established palm oil-producing country – where it has signed long-term leases with the country’s government. The projects cover an area of 110,000 hectares, with 89,000 hectares suitable for the cultivation of oil palm.
Equatorial’s directors said today that, in addition to the potential long-term strategic benefit of strengthening its relationship with BioPalm Energy, and the wider Siva Group, the loan agreement provides it with an opportunity to generate a competitive rate of return on cash funds held and also with exposure to a major oil palm project outside of West Africa.