Agriterra agrees unsecured $1.7m term loan with major shareholder

15th Nov 2023 14:11

(Sharecast News) - Africa-focussed agricultural company Agriterra announced an unsecured term loan agreement worth $1.7m on Wednesday, with its majority shareholder Magister Investments.

The AIM-traded firm said the financing development had several vital implications for its operations and financial stability, allowing it to replace around $1.325m in higher-cost external financing previously obtained from Standard Bank, potentially reducing its financial expenses.

Secondly, the loan would enable Agriterra's wholly-owned subsidiary, Desenvolvimento E Comercializacao Agricola (DECA), to acquire essential capital equipment in Mozambique.

The equipment would be crucial in expanding the company's biscuit plant operations and accessing new revenue streams within the country.

Finally, the term loan would give Agriterra $0.15m in working capital for its head office operations.

The key terms of the term loan included a 12-month duration, with principal and interest due at the end of the term, subject to extension for an additional 12 months on the company's request.

Agriterra said the interest rate was set at SOFR plus 6% per annum, compounded quarterly, and paid in full on maturity, with no arrangement fees associated with the loan.

The company noted that entry into the term loan constituted a related party transaction under the AIM rules.

However, after consultation with its nominated adviser, Strand Hanson, the board's independent directors deemed the terms fair and reasonable from the shareholders' perspective.

"The repayment of local bank borrowings in Mozambique will reduce the impact of the high interest rates charged by domestic banks," said non-executive chair Caroline Havers.

"In addition, the financing of the acquisition of new capital equipment by DECA will support ongoing efforts to diversify our product and revenue streams as we seek to solidify our base operations.

"We thank Magister for its continued support in providing this new financing, which demonstrates its ongoing commitment to our business and shareholder base."

Reporting by Josh White for Sharecast.com.