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DekelOil: Completion of Debt Refinancing on Improved Terms

DekelOil secured a new seven year loan at a lower interest rate of 6.85% from 10.65%, which would imply an annual interest expense saving of at least €200k. This will certainly boost free cash available to shareholders as well as continue to strengthen the balance sheet.

The talk of commencing a dividend policy is a real possibility and based on a conservative pay-out ratio of 10% on 2016 free cash flow estimates will put DekelOil on a dividend yield of 1.8%. Furthermore, we expect there is substantial opportunity to achieve dividend growth in the following two years where they have the potential to become of one the best yielding stocks on AIM. The Company is an established palm oil producer and has continued to ramp up in production year-on-year and holds strong relationships with local small holders. On top of today’s refinancing news, the management has been able to strengthen its balance sheet with the reduction in leverage by cancelling a capital note worth €5.1m at an interest rate of 10% back in January, and improving its refinancing terms with a new €9.15m at an interest rate of 7% replacing the old €8.65m loan at 10.5% back in September.

The current market capitalisation of £26.3m is unwarranted. As a result, DekelOil presents an excellent opportunity for investors seeking a balance of capital growth and income. We maintain our target price of 32 pence per share. 

DekelOil Public Limited, operator and 85.75% owner of the vertically integrated Ayenouan palm oil project in Côte d'Ivoire (the 'Project'), is pleased to announce the refinancing, on improved terms, of a project development loan which was secured to help fund the construction of the Company's 60 t/hr extraction mill ('the Mill'), which is one of the largest in West Africa.  This will immediately result in a significant reduction in interest costs and will have a positive impact on the Company's profitability. 

  • New seven year €8.4 million unsecured loan with interest payable at a rate of 6.85% completed with a syndicate of leading regional financial institutions (the 'New Loan')
  • The New Loan was oversubscribed with the lead participants being Ecobank Asset Management (and its affiliates) and Sogeburse (and other affiliates of  the Société Générale Group), in addition to several other regional financial institutions and utility companies
  • Replaces €7.6 million loan with interest payable at a rate of 10.5% secured with West African Development Bank ('BOAD') with remaining tenure of 3.5 years (the 'Old Loan')
  • Additional capital to be invested in on-going capital improvements and expansion objectives which will be announced as appropriate
  • The Directors believe that the reduced interest rate payable will lead to a significant reduction in the annual interest costs to the Company while the scheduling of debt payments over seven years will also be of benefit

 DekelOil Executive Director Lincoln Moore said, "Today's New Loan will directly improve our profitability and will free up additional cash flows either for reinvestment in the business as we look to build DekelOil into a leading West African focused palm oil producer or, when it is appropriate to do so, return capital to our shareholders in the form of dividends.

"The New Loan marks the completion of our senior debt refinancing on improved terms, which leaves us with a balance sheet and corporate structure more befitting of the fully operational and profitable palm oil producer which DekelOil has become.  All our original development loans have now been replaced with debt facilities secured with leading regional institutions with significantly reduced interest payments and longer repayment profiles."