Obtala Limited (LON:OBT) has announced the initial funding of a new wholly-owned subsidiary, Obtala (Hong Kong) Limited, with the cash earmarked to finance the group’s timber trading activities.
An initial US$1mln loan will carry 11.5% interest over a 10-year term, the company revealed. It added that the funds can be used for financing receivables, inventory and supplier pre-financing and will be put to work immediately.
In the meantime, an external trade finance arrangement is being finalised. Obtala said the size and terms of that funding arrangement will be announced once legal documentation has been completed.
"Since the completion of the WoodBois acquisition we have conducted in-depth analysis in order to understand where the true competitive advantage and highest margin opportunities are, in sourcing and trading African timber,” said Paul Dolan, Obtala chief executive.
“We are close to the completion of due diligence with an external trade finance provider that can best support our working capital requirements, not only for timber trading but also from the increased levels of production we are expecting in both Gabon and Mozambique in 2018.
“This combination of internal and external trade finance will allow us to optimise profitability while growing the timber trading division during 2018."
The US$1mln loan is being provided via investments by the company’s directors.
Dolan is investing US$250,000 alongside deputy chairman Martin Collins and Argento Ltd director, Tom Holroyd who are also providing US$250,000, while Obtala director Jessica Camus is investing US$200,000 and the company’s chief strategy officer, Adam Baker is investing US$50,000.
Independent directors Miles Pelham, Carnel Geddes and Kevin Milne with consultation of nominated adviser, Northland Capital, have deemed the related party transaction to be ‘fair and reasonable’ insofar as shareholders are concerned.