Proterra closes second credit fund above $500m hard-cap

Proterra Investment Partners surpassed an initial target of $400 million to close the second iteration of its credit strategy over its $500 million hard-cap.

Proterra Credit Fund 2 gathered commitments from state, local and corporate pension plans, family offices, RIA clients and Proterra personnel. Briarcliffe Credit Partners, a private-credit focused placement agent headquartered in New York, acted as sole placement agent for the vehicle.

Managing partner Rich Gammill told Agri Investor that Credit Fund 2 saw re-ups from each investor in the first credit fund and new commitments from pensions, endowments, family offices and insurance companies. The decision to invest through credit, he explained, is a function of the higher risk-adjusted returns achievable and opportunity created by recent years’ changes among traditional banks.

“With rising interest rates, bank balance sheets are rising so banks have definitely pulled back in terms of their cashflow lending, not just into the food vertical, but really all lending in general,” said Gammill. “Banks have been pulling back, so that is creating a very interesting opportunity for private credit funds. You don’t have to compete with banks directly because they are having issues with other parts of their balance sheet, like real estate or whatever else.”

Minneapolis-headquartered Cargill spin-out Proterra established its food and beverage credit platform in 2019 and closed its first debt fund on $200 million in March 2019.

The Ohio Police & Fire Pension Fund made a $50 million commitment to Credit Fund 2 in February 2022. According to materials presented by investment staff provided to Agri Investor, the vehicle targets net IRRs of 13 percent through provision of up to five-year loans of between $10 million and $50 million, with interest rates of between 10-12 percent.

“Proterra’s competitive advantage is its relationship with and collaboration with the Farm Credit System (FCS), a government sponsored entity that provides highly attractive financing for agriculture-related business through the US. By joining FCS in the lending process, Proterra is able to offer more competitive loan rates while benefiting from FCS loan sourcing, underwriting and conforming loan standards,” wrote staff of $17.3 billion OP&F.

Proterra’s FCS partnership remains in place, Gammill said. Materials presented to OP&F suggest plans call for up to 80 percent of Credit Fund 2 investments be extended alongside the 15 FCS entities with which the firm has active relationships.

Gammill also explained that the firm’s April 2022 loan to help support relocation of a protein supplier after a catastrophic fire was not typical. The focus of the strategy, he said, remains on provision of unitranche loans where borrowers are presented with a single document containing first-out and last-out tranches. Most of the more than 20 credit investments Proterra has carried out have been such unitranche facilities and the average company in the credit fund’s portfolio is more than 50 years old, according to Gammill.

Proterra’s track record as a specialist in the food and ag value chain, he added, gives it an advantage over generalist private lending peers.

“Sometimes things go wrong,” he said. “When a loan stops performing or there are issues related to a borrower, we also have the experience and knowledge to step in and help them out.”

Proterra launched a real estate strategy in May, is seeking $500 million for a US-focused farmland vehicle and managed a total of $3.9 billion as of December, according to a March filing.