The Ireland Strategic Investment Fund, Finance Ireland and Rabobank have launched a €100 million debt fund for dairies in the Irish Glanbia Co-operative Society, in a new lending model based on milk prices.
Rabobank is the fund’s cornerstone investor and created the structure, but the breakdown of individual investors’ commitments was not disclosed.
The fund will provide loans valued between €25,000 and €300,000 to Glanbia’s milk suppliers, with variable repayment options based on milk prices. Loans from the fund will be originated and managed by Finance Ireland and repaid through deductions from milk purchase payments from Glanbia.
“This new model of funding for milk suppliers is an international first and will mitigate the investment risks for milk suppliers,” said European Union Commissioner for Agriculture and Rural Development Phil Hogan in a statement.
“It will be a valuable tool in assisting dairy farmers to manage income volatility, which is particularly challenging for family farms across the EU.”
Under the terms of the proposed scheme, borrowers’ payments would temporarily increase or decrease whenever Glanbia Ingredients Ireland’s manufacturing milk price goes above 34 cents per litre or below 28 cents per litre. Disruptions in production from disease or prices falling below 26 cents per litre over three months would trigger a six-month suspension of payments.
“This product is designed to match the cashflow generated by a dairy farm enterprise, with no repayments during certain times of low prices and increased repayments at times of high prices,” said Siobhan Talbot, Glanbia group managing director.
Loans from the fund will have a standard term of 8 years, with up to 2-year extensions triggered by volatility in the market. Interest rates for the loans will be set at 3.75 percent above the monthly Euro Interbank Offered Rate.
The Ireland Strategic Investment Fund, with €7.6 billion assets under management, is an Irish sovereign wealth fund focused on supporting Irish employment and economic activity. According to PEI Research and Analytics, the fund is aimed at part-financing the cost of Irish social welfare and public service pensions from 2025 onward.
Finance Ireland is a Dublin-based financial services group. The firm’s asset management division is primarily focused on debt purchase and recovery.