AGT acquires more loan backing

AGT Food and Ingredients has secured $400 million in new credit facilities from a syndicate of banks.

The loan was made by a consortium of Canadian banks led by the Bank of Nova Scotia.

“In the current global pulse and staple foods environment, the support and confidence shown by our lenders positively positions AGT to continue to realize the benefits of our diversification strategy,” company president Murad Al-Katib said in a news release.

The company had recently come under fire by an investment analyst for being over-leveraged.

“AGT is a capital-heavy, cyclical commodity business with slim margins and perpetually low returns on capital,” said Auger Analyst, a contributor with Seeking Alpha, a website that provides stock market insights and financial analysis.

“Despite this, the business has strapped on a shockingly large and increasingly burdensome debt.”

The criticism was made before the latest loan was secured. Al-Katib laughed at the notion that AGT was in financial trouble, noting that it had more liquid assets than debt.

The latest credit facilities are part of an ongoing financial restructuring of the company.

In December 2017, AGT negotiated an extension on another credit facility. It will now mature on Jan. 24, 2020, instead of Jan. 24, 2019. The amount of the facility was reduced to $400 million from $437.5 million.

The company said at the time that it didn’t need as much credit because in August 2017 it received a $190 million injection of capital from Fairfax Financial Holdings Ltd. in exchange for preferred securities and common share purchase warrants.

Al-Katib said the Fairfax investment shows the company’s strength but Analyst sees it as diluting share value.

Analyst said the company was “flirting with financial ruin” because it was dangerously close to violating the earnings before interest, taxes, depreciation and amortization (EBITDA) to interest expense ratio established by the lenders.

But the banks have now eased back on the ratios to make them more attainable.

“We are pleased with the completion of our amended credit facilities,” said Al-Katib.

“The cost of our debt remains unchanged and the financial covenants have been updated to reflect the gradual normalization of earnings through 2018 and 2019.”

AGT also made news on the other side of the world last week.

According to a Google translation of a Turkish newspaper article, the chief prosecutor of Turkey had arrested Mahmut Arslan and his brothers Huseyin, Ali and Hasan.

The Arslan family runs Arbel Group, which is AGT’s crown jewel in Turkey.

The article said they were arrested in conjunction with the Gulen movement investigation. Fethullah Gulen is an exiled Turkish cleric accused of leading an attempted coup against Turkish President Recep Tayyip Erdogan.

The story also said the Arslan brothers were detained on charges of aiding and abetting the PKK, a Kurdish separatist group.

Another Turkish article quoted the Arslan’s lawyer, Murat Altindere, who said the newspaper allegations that the brothers were arrested or detained was false. He said only two Arbel employees were taken into custody.

Altindere said his clients are not in custody but will co-operate with the relevant authorities throughout the course of the investigation if requested and deemed necessary.

The Arslans co-founded Saskcan Pulse Trading with Al-Katib. They provided the initial capital for the venture that eventually became AGT and designed the inaugural lentil splitting plant in Regina.

Huseyin Arslan is the executive chair of AGT, and the Arslan family hold about 15 percent of AGT’s common shares in a trust administered by Al-Katib.

Al-Katib also said reports that the Arslan brothers have been arrested are malicious and false.

“Rumours and slander and propaganda campaigns and lack of journalistic integrity leads to these types of things in Turkey,” he said in an email.

“This is personal, political stuff in a complex environment in Turkey.”

He added that what is happening overseas has no effect on AGT’s business.

“We are (as) strong as ever,” said Al-Katib.

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