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A refinancing by DekelOil Public Limited (LON:DKL) is expected to positively impact profitability.
A loan for €8.69mln that was used to part fund its Ayenouan palm oil in Ivory Coast has been replaced by a new €9.15mln, seven-year facility.
The coupon on the debt has come down to 7% from 10.5% meaning the annual interest charge drops by €270,000. The capital repayments are also reduced – by €600,000 this year and €800,000 next.
The firm said it is advanced discussions to refinance €6.7mln development loan. It cancelled a €5.2mln capital note last December.
Dekel has been able to secure debt on far better terms after successfully building and bringing into production the palm oil plant at Ayenouan.
This provides it with a cash generative asset against which it can borrow. In the eyes of lenders the company is a far less risky proposition, which is reflected in these lower interest rate payments.
Last year the operation churned out 35,770 tonnes of crude palm oil (CPO).
“With the Project significantly de-risked, we are now focused on ensuring the excellent progress made on the ground is fully reflected in our corporate structure and financing arrangements, the majority of which were secured to fund the construction of the mill,” said chief executive Lincoln Moore.
“Today's refinancing ought to be seen in this context and I look forward to providing updates regarding the securement of improved terms for our remaining debt, where discussions are at an advanced stage.”
Cantor Fitzgerald added the refinancing has significantly reduced funding risk for Dekel.
“The cheaper loan also improves profitability and cashflow and we are upgrading our forecasts and valuation.”
The target price is now 2.2p from 2.0p and the recommendation remains ‘buy’.
Shares rose 5% to 1.24p.