The purpose of bond issuances in 2014 is to raise capital for accelerating the process of development of coffee plantations in the Equateur province in the north of the Democratic Republic of the Congo. There are several privately-owned firms that actively consolidate plantations and cultivate soft commodities, chiefly coffee beans (Arabica & Robusta) and cocoa. The primary revenue center for the business comes from the direct cultivation, harvesting and trading of coffee beans on a day to day basis. The companies, through their established relationships with commodity brokers and Futures Commission Merchants, effectively sell the harvested beans overseas through the port in the west of the country. The companies’ secondary stream of income is derived from active trading of coffee beans that are not to be shipped out of the country.
At this time, the group of companies is seeking to raise the necessary capital for improving the operations. The vast majority of the invested capital will be used for direct boosting of the land ownership. Briefly, the capital will be used as follows:
- Purchase of the land for coffee growing
- Transformation into coffee plantations where needed (consolidation and cultivation)
- Mainly purchase of the already-existing coffee plantations
- General working capital
The mission is to develop the local companies into well-established coffee growing and trading firms that are aiming to become major players in the African region with the intent to realize sustainable growth of profit over the next years. Coffee growing has a very long history in the DRC, therefore through their expertise, the firms will be able to bring the operations of the businesses to substantial profitability. A strong rate of growth after having raised the necessary capital to expand the land ownership is widely expected. The land area cultivated for coffee will be expanded substantially given the prevailing land prices in 2014.
The impetus to raise funds through this public bond issue comes during the times of surging coffee prices. An unusual drought during the rainy season in Brazil sent coffee futures soaring earlier this year to their highest prices in more than two years. Vietnam, on the other hand, as the second largest coffee exporter, is facing a spread of fungus that is majorly detrimental to coffee beans. Africa and the DRC, as its former largest coffee exporter, are on their way to regain the market position damaged by its civil war a few years ago. Largest coffee growers include Ets. Kantuun, Ets. Assani, SAA, Tsibaka Hintes.
The said corporate bonds will yield attractive coupons over the next years and guarantees are expected to be issued in order to eliminate the possibility of default. This will be provided by an entity tied to the government of the DRC. The details are yet to come and will be specified in the subscription agreements.