Cordiant, an emerging markets-focused private debt fund manager, has contributed $10 million to a $100 million financing facility for Brazilian company Fiagril alongside global agricultural group Bunge International Commerce.
It financed the facility from its Cordiant Emerging Loan Fund IV, which focuses on floating rate, private loans in emerging markets. The deal represents Fund IV’s second agriculture-related deal and Cordiant’s 26th overall, according to David Creighton, chief executive.
“Of the 200 deals we have done in 55 different emerging markets, 26 are agriculture-related representing more than 10 percent of our activity,” he told Agri Investor. “We have invested in a wide range of agriculture-related assets from cellulose pulp in Brazil to bananas in Ecuador to biofuels in Hungary and Africa.”
Fiagril Participações, based in Mato Grosso in Western Brazil, is a major supplier of seeds, fertiliser and
other materials to Brazil’s agricultural industry, primarily to the region’s soybean farmers, Cordiant said in a statement confirming the deal.
Fiagril will use the funding to purchase seeds and fertiliser to sell to farms in Mato Grosso state ahead of the southern hemisphere’s 2014 harvesting season, Cordiant said.
Cordiant is interested in a range of different types of private debt investments including providing debt financing alongside banks, or instead of banks, on private equity transactions. The firm thinks that wood pulp has particular upside potential and is interested in developing dynamics surrounding water availability, Creighton told Agri Investor.
The company stays away from agriculture deals where the business concerned relies on government subsidies.
“It is better to make sure that you are investing in deals that can stand on their own legs than require a subsidy,” said Creighton. “These tend to be long term deals and any change in government or macro-economic pressures could impact the reliability of subsidies.”
Cordiant’s Fund IV held a first close in April last year on $250 million, and is still open to commitments.
“This loan is an excellent opportunity for the CELF IV fund to diversify into one of the fastest-growing agricultural markets in the world, while staying true to the conservative risk management principles Cordiant has always employed. Acting in syndication with a world-class global business like Bunge means Cordiant benefits from Bunge’s unparalleled presence on the ground in Brazil, which will significantly enhance the risk mitigation of the loan,” said Creighton.
Bunge is a global agribusiness and food company operating in 40 countries and focused on improving productivity and product quality.
Additional reporting by Louisa Burwood-Taylor.