Obtala secures financing and restructures focus to timber
announced today a set of deals to improve the Group balance sheet and streamline the underlying business structure, ultimately to deliver on the company’s growth strategy.
In an effort to narrow its focus to timber trading and production, all the agriculture holdings were sold to a local Tanzanian partner, Envision Consulting for $2.5 million, deemed a fair and reasonable related party transaction by the nominated adviser.
And in a wave of institutional funding, 1798 Volantis Fund invested an additional £2 million into Obtala via the issue of 40m shares priced at 5p, a 12% discount to Wednesday’s closing price. As a result Volantis will have an increased shareholding amounting to 12.9%.
1798 Volantis Fund, managed by Lombard Odier Asset Management, was also issued 40m warrants with an exercise price of 10p per share, with half exercisable at any time if Volantis owns 10% or more of Obtala.
Shares in Obtala rose over 16% to 6.65p each following the news
Obtala’s wholly owned Hong Kong subsidiary, entered into a loan agreement with Volantis for $5 million, secured against receivables, invoices and timber inventories, at a rate of 11.5% per annum. Half of the warrants held by Volantis are exercisable between the 1st and 3rd year of the Loan Agreement.
Obtala's Chairman Miles Pelham said: "Today's announcement represents the culmination of hard work and negotiation over many months with the net result being the evolution of a dedicated and focussed timber production and trading business with a simplified corporate structure.”
He mentioned that the significant investment from Volantis, and the cash flowing into the trade finance vehicle, “should significantly increase the profitability of the trading division”.
Obtala also entered into an agreement to acquire an additional 25% of Montara Continental Limited for $2.5 million, or the issue of 40m shares, in order to take 100% ownership of the assets.
Wholly owned ownership of assets provides Obtala with a more attractive investment case to potential investors and trade finance providers.
Miles Pelham added: “We believe these developments have the potential to be transformational for Obtala and provide the Group with the strongest possible start to 2019.”
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