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REA Finance B.V.: Annual accounts for 2020

06/10/2021 | 08:31am EDT
REA Finance B.V. (RE20) 
REA Finance B.V.: Annual accounts for 2020 
10-Jun-2021 / 13:30 GMT/BST 
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 
(MAR), transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
=---------------------------------------------------------------------------------------------------------------------- 
REA Finance B.V. 
Amsterdam, the Netherlands 
ANNUAL REPORT 2020 
 
 
TABLE OF CONTENTS 
 
1. MANAGEMENT BOARD REPORT 
1.1 MANAGEMENT BOARD REPORT 
 
2. FINANCIAL STATEMENTS 
2.1 BALANCE SHEET AS AT 31 DECEMBER 2020 
2.2 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2020 
2.3 NOTES TO THE FINANCIAL STATEMENTS 
2.4 NOTES TO THE BALANCE SHEET 
2.5 NOTES TO THE PROFIT AND LOSS ACCOUNT 
 
3. OTHER INFORMATION 
3.1 INDEPENDENT AUDITOR'S REPORT 
3.2 STATUTORY RULES CONCERNING APPROPRIATION OF RESULT 
1. MANAGEMENT BOARD REPORT 
1.1 Management board report 
 
Management presents herewith to the shareholder their annual report and audited accounts of REA Finance B.V. (the 
"Company") for the year ended 31 December 2020. 
 
General 
 
The Company is a private company with limited liability incorporated under the laws of the Netherlands and acts solely 
as a finance company on behalf of its parent company. The immediate parent and ultimate holding company is R.E.A. 
Holdings plc ("REAH"), located in London, the United Kingdom. 
 
The annual accounts have been prepared in pounds sterling ("GBP") instead of euros since the majority of the transactions 
within the Company occur in pounds sterling, which is the Company's functional currency. 
 
Management of the Company resides with the management board, Apex Financial Services B.V., a corporate director. The 
Company has no employees. The Company relies on the policies and procedures of REAH as respects governance and risk. 
The audit committee of REAH supervises the Company pursuant to the terms of reference of the audit committee and 
reports to the management and board of REAH as respects risks and internal controls.  Responsibility for environmental, 
social and corporate governance matters for the group and its subsidiaries, including the Company, resides with the 
management and board of REAH. 
 
Overview of activities 
 
The Company issues sterling notes and uses the proceeds to issue loans to its parent company, REAH, on the same terms 
as the sterling notes save for a margin on the rate of interest.  The Company receives all of its income from REAH 
through intercompany financing of its foreign subsidiaries. The REAH group is principally engaged in the cultivation of 
oil palms in the province of East Kalimantan in Indonesia and in the production and sale of crude palm oil ("CPO") and 
crude palm kernel oil ("CPKO"). 
 
At 1 January 2020 the Company had outstanding 30,852,000 GBP1 nominal 8.75 per cent guaranteed sterling notes 2020 (the 
"sterling notes"), repayable 31 August 2020. 
 
At 1 January 2020 the Company also had a loan receivable from REAH of GBP31,327,000 bearing interest at 8.9283 per cent 
and repayable on 20 August 2020 (the "loan"). 
 
On 31 March 2020, holders of the sterling notes agreed proposals to extend the repayment date of such notes from 31 
August 2020 to 31 August 2025. As consideration for this, the sterling notes are  now repayable at GBP104 per GBP100 
nominal (the "premium") on 31 August 2025 and REAH has issued to noteholders 4,010,760 warrants with each such warrant 
entitling the holder to subscribe, for a period of five years, one new ordinary share in the capital of REAH at a 
subscription price of GBP1.26 per share. The premium is payable on redemption of the sterling notes on 31 August 2025 (or 
earlier in the event of default) or on surrender of the sterling notes in satisfaction, in whole or in part, of the 
subscription price payable on exercise of the warrants on the final subscription date. 
 
In consequence, the Company has agreed with REAH that an amount equivalent to the premium, if any, payable on 
redemption of the sterling notes on 31 August 2025 shall be aggregated with the loan which is now repayable on 20 
August 2025. 
 
The margin on the loan was independently reviewed for transfer pricing purposes and, accordingly, the rate of interest 
on the loan was changed from 8.9283 per cent to 9.007 per cent with effect from 1 April 2020. 
 
During the period under review the Company received interest on the loan from the Company to REAH and paid interest to 
the holders of the sterling notes. 
 
1.1 Management board report (continued) 
 
At 31 December 2020, the Company had outstanding: GBP30,852,000 nominal of sterling notes (amortised cost GBP31,679,213) 
bearing interest at 8.75 per cent and repayable on 31 August 2025; and the loan of GBP31,327,000 to REAH (amortised cost 
GBP32,144,755) bearing interest at 9.007 per cent repayable to the Company on 20 August 2025. 
 
Financial information and performance 
 
The net asset value of the Company as at 31 December 2020 was GBP1,047,084 (31 December 2019:  GBP1,012,473). The result 
for 2020 is a profit of GBP34,611 (2019: profit of GBP48,368). 
 
Risks and uncertainties 
 
The principal risks and uncertainties facing the Company relate to the due performance by REAH of its obligations under 
the loan agreement with the Company. Any shortfall in performance would impact negatively on the Company's ability to 
meet its obligations to the holders of the sterling notes. The exposure of the Company towards the noteholders in the 
event of any shortfall in the collection of the loan to REAH is limited by: 
 
  ? the guarantee given by REAH and R.E.A. Services Limited ("REAS"), a subsidiary company of REAH incorporated in the 
    United Kingdom, in favour of the noteholders; and 
  ? the Limited Recourse Agreement (the "LRA") dated 29 November 2010 and made between the Company, REAH and REAS. 
 
Payment of the principal, premium and interest by the Company in respect of the sterling notes is irrevocably and 
unconditionally guaranteed by REAH (the "guarantor") and REAS (the "co-guarantor").  The full terms of the guarantee 
are set out in the trust deed constituting the sterling notes. 
 
The obligations of the guarantor in respect of the guarantee are unsecured and will rank equally and without preference 
with all other unsecured and unsubordinated obligations of the guarantor, that is in priority to ordinary and 
preference share obligations. 
 
The obligations of the co-guarantor in respect of the guarantee are secured by way of first ranking charges in favour 
of the trustee (on behalf of the noteholders) over: (i) two designated bank accounts of the co-guarantor; and (ii) the 
rights of the co-guarantor in respect of all monies owed to it from time to time by any Indonesian debtor subsidiary 
(IDS). 
 
An IDS means any qualifying subsidiary which is indebted to the co-guarantor, for so long as such qualifying subsidiary 
is so indebted.  A qualifying subsidiary means any subsidiary of the guarantor incorporated in Indonesia and engaged in 
the cultivation of oil palms and/or the processing of oil palm fruit. Pursuant to the trust deed, covenants are in 
place to ensure an adequacy of cover for repayment of any IDS loan. 
 
Currently, there is one IDS loan outstanding to PT Cipta Davia Mandiri ("CDM") in the amount of USD62.8 million (GBP46.0 
million).  To satisfy payment under the guarantee, REAH and REAS would look to repayment of the loan by CDM which as at 
31 December 2020 had headroom under the covenants of some GBP3.0 million. 
 
The LRA reflects the intention of the parties thereto that the Company, in relation to its financing activities, should 
(i) meet the minimum risk requirements of article 8c, paragraph 2, of the Dutch Corporate Income Tax Act and (ii) not 
be exposed to risk in excess of the Minimum Risk Amount ("MRA"). For these purposes the MRA is 1 per cent of the 
aggregate amounts outstanding under the loan agreement between the Company and REAH. As respects (i) above, the 
Company's capital and reserves as at 31 December 2020 and 2019 complied with the minimum risk requirements of article 
8c, paragraph 2, of the Dutch Corporate Income Tax Act. In addition, pursuant to the LRA, REAH and REAS limited their 
rights of recourse to the Company in respect of any calls upon their guarantee of the sterling notes. 
 
1.1 Management board report (continued) 
 
Credit risk 
 All borrowings are lent to REAH, the parent company. Management makes an annual assessment regarding the valuation and 
recoverability of the loan receivable and interest receivable from REAH. Ten year projections are prepared at REAH 
group level. These demonstrate that the group has sufficient liquidity for its operations and borrowings can be repaid 
as they fall due. The group cash projections form the basis for the REAH and Company 12 month cashflow forecasts which 
demonstrate that REAH can finance its interest payments to the Company so that the Company can pay the sterling note 
interest and other expenses. 
 
Going concern and Covid-19 risk 
 
The Company receives all of its income from its parent company, REAH, and accordingly is wholly dependent on the 
viability and going concern status of the parent company. 
The assessment of going concern of the Company, therefore, reflects the assessment of viability and going concern of 
REAH by the directors of REAH. 
At the time of signing the 2019 Company accounts, it was concluded that it was appropriate to prepare the financial 
statements on a going concern basis.  With the onset of the Covid-19 pandemic early in 2020, CPO prices suffered a 
sharp fall which, coupled with the possibility of operational issues caused by the pandemic, could have resulted in 
liquidity issues and trigger the need for bank loan repayment to be deferred or covenants waived.  This meant that 
there was a material uncertainty about the ability of REAH and, therefore, the Company to continue as a going concern. 

(MORE TO FOLLOW) Dow Jones Newswires

June 10, 2021 08:30 ET (12:30 GMT)

Stocks mentioned in the article
ChangeLast1st jan.
BRITISH POUND / AUSTRALIAN DOLLAR (GBP/AUD) 0.42% 1.89671 Delayed Quote.6.17%
BRITISH POUND / CANADIAN DOLLAR (GBP/CAD) -0.02% 1.73794 Delayed Quote.0.17%
BRITISH POUND / JAPANESE YEN (GBP/JPY) 0.24% 153.107 Delayed Quote.8.31%
BRITISH POUND / NEW ZEALAND DOLLAR (GBP/NZD) 0.16% 1.99541 Delayed Quote.5.08%
BRITISH POUND / SWISS FRANC (GBP/CHF) -0.05% 1.26404 Delayed Quote.4.66%
BRITISH POUND / US DOLLAR (GBP/USD) 0.05% 1.39687 Delayed Quote.1.69%
CRUDE PALM OIL 0.00% 969.5 End-of-day quote.14.36%
DJ INDUSTRIAL 0.44% 35084.53 Delayed Quote.14.55%
EURO / BRITISH POUND (EUR/GBP) 0.06% 0.85198 Delayed Quote.-4.64%
KERNEL GROUP HOLDINGS, INC. 0.00% 9.68 Delayed Quote.0.00%
KERNEL HOLDING S.A. -0.40% 49.3 End-of-day quote.0.00%
LONDON BRENT OIL -1.19% 74.88 Delayed Quote.44.56%
REA GROUP LIMITED 2.37% 162.95 End-of-day quote.9.47%
WTI 0.16% 73.39 Delayed Quote.50.25%
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