Proterra Investment Partners extended a loan of an undisclosed size to Deli Star Corporation, a protein supplier that relocated from Illinois to St Louis following a catastrophic fire that destroyed its production facility last year.
Deli Star was founded in 1987 and before January 2021 provided fresh-cooked protein products from a 75,000 square foot facility located in Fayetteville, Illinois. The cause of the fire has not been determined.
Proterra managing director Matthew Swanson told Agri Investor that Deli Star partnered with the city of St Louis to build a state-of-the-art 110,000 square foot facility there, about 45 miles from the original facility. Proterra’s loan was designed to support construction of the plant, which opened in February.
“Oftentimes, I use the example of a plant burning down as a worst-case scenario and they actually had a plant that burned down,” Swanson said. “It was not an easy situation for a traditional commercial bank to come in and help them with the rebuild. Largely, their alternatives were to raise more equity – which is dilutive – or try to find some alternative financing. That’s where we saw the opportunity to help them out.”
Swanson explained that Minnesota-headquartered-Proterra’s investment interest in Deli Star was related to the company’s proprietary preservation methods to reduce food waste efficiently.
According to a presentation to the Ohio Police and Fire Pension Fund, which committed $50 million to the vehicle in February, the fund seeks a net IRR of 13 percent through the provision of 20 to 25 loans on terms of up to five years.
Loans from Proterra Credit Fund 2 will vary between $10 million and $50 million, with interest rates of between 10 percent and 12 percent, according to the presentation. The strategy focuses on 20 segments of agribusiness that include natural sweeteners, fruit processers, produce distribution, bakery products, beef processing, plant-based proteins and others.
OP&F staff said the competitive advantage of Proterra’s vehicle was in its relationship with the Farm Credit System, a national lender and Government Sponsored Entity that provides highly attractive financing to agriculture-related businesses throughout the US.
According to OP&F, plans call for up to 80 percent of loans from Proterra Credit Fund 2 to be made in conjunction with Farm Credit, utilizing a unitranche structure in which borrowers are presented with one document containing both a first-out tranche and a higher-yielding, last-out and riskier tranche allocated to Proterra.
Swanson declined to detail terms of the Deli Star loan or confirm whether the company is a Farm Credit customer. He did explain that the facility provided to Deli Star would be difficult for the company to secure elsewhere and utilizes the unitranche structure that is the focus of Proterra’s Farm Credit partnership.
“There’s a financing void in food and ag,” said Swanson. “You’ve got a lot of traditional lenders like Farm Credit and commercial banks and insurance, but from what I see, all the money that has flowed into private debt funds; they are not really active in most segments of food. That’s where we focus our efforts.”
The first iteration of Proterra’s credit fund closed on $200 million in March 2019 after drawing commitments from a mixture of state and corporate pension plans, insurance companies and funds of funds.
Proterra managed $3.9 billion as of December 2021. It spun out from Cargill in 2016.