A statement on the completion of the restructuring of Feronia / PHC
In July it was announced that Feronia was facing bankruptcy and was to undergo a financial restructuring in order to secure the long-term future of PHC, its palm oil business located in the Democratic Republic of the Congo. On November 23rd, 2020, the formal restructuring agreement between the company and its lenders was signed.
With its investment in Plantations et Huileries du Congo (PHC)/Feronia, since 2015 BIO contributes to the provision of jobs and the social development of tens of thousands of people in one of the poorest and isolated areas in the world.
In July it was announced that Feronia was facing bankruptcy and was to undergo a financial restructuring in order to secure the long-term future of PHC, its palm oil business located in the Democratic Republic of the Congo.
On November 23rd, 2020, the formal restructuring agreement between the company and its lenders was signed, marking a major milestone of the restructuring that began in July. The restructuring sees Feronia KNM, a Belgian company which is majority owned by food and agriculture focused US investment fund KN Agri LLC, inject USD 15 million of fresh capital into the business, of which USD 5 million has already been disbursed. KN Agri brings together a group of African investment professionals with deep roots in their communities who are deeply passionate about further unlocking the potential of PHC. BIO’s British colleague Development Finance Institution (DFI) CDC ceases to be an equity investor in the company and becomes a lender alongside BIO and other European DFIs.
PHC operates in very remote and poverty-stricken areas of the DRC, by many measures the poorest country in the world. In this challenging location, PHC’s productivity is significantly below that of comparable palm oil businesses across Africa. The company’s trading environment remains difficult due to limited routes to market and a prolonged slump in the price of palm oil. Its challenges are compounded by the scale of the ongoing task to secure employment and develop social infrastructure by rehabilitating and modernising the company and the plantations. This means that the road ahead for the company remains long and that more work and action will be required to bring it to profitability and sustainability.
However, the substantial amount of fresh capital to be provided by the new owners and the continued support of the DFI lenders will give PHC the best chance to become a financially sustainable business, continuing to support the people in the region.
In order to contribute to PHC’s financial recovery, to safeguard a maximum of jobs, as well as the company’s contribution to food safety in the DRC, BIO is forbearing 50% of its USD 11 million loan to the company, within the framework of the restructuring that sees PHC agreeing to implement an ambitious updated Environmental & Social Action Plan (ESAP). In doing so, BIO aligns itself with the other lenders who are also using debt as a leverage to attain enhanced Environmental and Social actions by the company. The new ESAP sets out in detail the steps that will be taken by the PHC Board and the company management, with the support of the DFI lenders to the company, to further improve worker pay and conditions, work in partnership with local communities, and maintain and improve environmental standards. Depending on the achievement of certain milestones in the new ESAP, the debt forbearance can progressively increase up to 80%. A summary of the new ESAP will be published online in due course by the company.
PHC is the sole formal employer in an extremely remote region of DRC. Local communities rely on the company for educational and medical facilities as well as clean water provision. Over USD 7 million has been spent on these facilities. Since 2013, production has increased five-fold owing to operational improvements including the rehabilitation of old plantations and the construction of two new mills at a cost of USD 28 million. USD 39 million has been spent on new trees and other agricultural improvements.
The ongoing Independent Complaints Mechanism (ICM) mediation process between the company and local communities will continue with the support of the new owners and the DFI’s.
With this restructuring agreement, an updated plan for comprehensive environmental and social measures to contribute to the sustainable development of the people in the region and a new, African management aligned with the impact objectives of BIO and its colleague DFIs, we believe Feronia/PHC is back on track to deliver on its ambitious economic and social development goals.
Plantations et Huileries du Congo
Debt € 9,741,280.77 (2015)Sub-Saharan Africa, Democratic Republic of Congo
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