Exclusive: Cordiant nears $500m first close on seventh fund

Having hired two Brazil-based execs, the Montreal-headquartered debt firm plans to raise a separate vehicle devoted to agriculture once it has closed its flagship fund.

Emerging-market, debt-focused Cordiant Capital Partners is nearing a first close on approximately $500 million for the seventh iteration of its flagship fund, according to a source familiar with the firm.

Agri Investor understands that a first close on Cordiant Fund VII is “imminent” and that the vehicle has a target of between $600 million and $1 billion. The vehicle will seek to offer an 8 percent annual return to investors, according to the source. Though not dedicated to agriculture, previous funds in the series have included loans to agricultural businesses. The source said up to a quarter of Fund VII could be used to lend into ag.

Cordiant declined to comment on ongoing fundraising for Cordiant VII, but did say that, following completion of the effort, the firm plans to raise a distinct vehicle devoted to agricultural lending.

“As a firm, we feel that agriculture is one of the key industry components in our origination and structuring engine,” co-chief executive Benn Mikula told Agri Investor. “Our dealflow of high-quality opportunities vastly outweighs the amount of capital we have available.”

Duo at the wheel

The firm’s agricultural investments are led by a pair of Brazil-based executives Cordiant hired last year following the departure of David Anderson, who led the firm’s trade finance and agribusiness investments for 11 years through May. Cordiant declined to comment on Anderson’s departure.

The new execs, Patrick Funaro and Stephen Pout, will report to Mikula. Both joined Cordiant last year from Easy Access Trading, a rea-asset/fixed-income platform based in Brazil. Previously, Funaro spent five years as a managing director at Natixis Brazil and held positions with FinEx Capital Management, ICAP and the Bioenergy Development Fund.

“The Brazilian agricultural sector has an excess of short-term financing and almost no long-term financing”
Stephen Pout, Cordiant Capital Partners

Prior to joining East Access in July, Pout served as an executive director at Bufalo, a logistics and supply firm in Brazil. The profile shows that earlier in his career, Pout also held positions with Gavilon, Macquarie Bank and Agriserve, a grain sector supply-chain service provider.

Funaro told Agri Investor that Cordiant’s agricultural lending tends to focus on family-owned businesses in Latin America, especially Brazil.

“We see huge opportunities in terms of structured finance and attractive returns for investors based on the strategy of solving for investors the long-term cash flow issues – basically, matching the cash flows of the producers with the flow of their debt,” said Funaro.

Fixing FX

Pout told Agri Investor that the team has already provided loans to a medium-sized sugar mill and a corn and soy farmer, both in Brazil. Cordiant’s typical agricultural loans are offered on a five- to seven-year term, with covenants relating to debt-to-EBITDA and interest-coverage ratios, Pout said. He declined to specify interest rates for the facilities.

“The Brazilian agricultural sector has an excess of short-term financing and almost no long-term financing in excess of five years. So, we do focus on that,” Pout said. “The purpose of these loans will be either financing investments on the farm, or, in some cases, we are talking to some very good farmers about buying other farms and investing in improved yields and farming practices, more precision farming, improving logistics and improving farm storage, which is a big problem in Brazil.”

In addition to originating new loans, Pout said that refinancing existing debt is also expected to be an important part of Cordiant’s agricultural lending strategy. Producers receiving such refinancings, Pout said, agree to supply a certain quantity to a major trading firm, with Cordiant paid offshore in US dollars.

“By keeping a strong view on collateral, and by keeping our business focused on dollarized exports, we mitigate ourselves from some of the FX risk we take in the country,” Pout said.