Proterra Investment Partners is using more than 25 underserved subsectors to guide its domestic agricultural lending strategy, says managing director Jonathan Logan.
Speaking Tuesday at sister publication Private Debt Investor’s 2019 New York Forum, Logan said there is an abundance of senior lenders active in ag, but Proterra has found few offering the second lien and junior debt financing instruments that have become the focus of the firm’s credit strategy.
The MD explained that as a result, Proterra is providing junior debt to cashflow-oriented agribusinesses in the US, with subsectors of particular focus including forest products, wine and animal protein.
“Keep in mind that the industry is about $500 billion plus in assets – in terms of loan volume into the agri space – so there’s a lot to pick away at,” Logan said.
“Some of these emerging trends we are seeing just in our own daily lives are requiring a lot of capital and that capital can be serviced in the form of senior debt, but also the junior debt instruments.”
In addition to the diversification provided by the variety of agricultural production in different regions of the US, Logan said Proterra has also aimed to finance different transaction types including mergers and acquisitions, capital expenditures, recapitalizations and others.
“For us, it’s a bit of an open field right now,” said Logan. “We feel that there is an interesting opportunity here for us to get a run at this sector from a different angle.”
As well as benefiting from access to customers through its heritage as a spin-out of Cargill, Logan said Proterra has established sourcing partnerships with commercial banks and regional advisory groups.
He highlighted the firm’s partnership with the Farm Credit System, which he introduced to the private equity-focused audience at the forum as a government-sponsored enterprise, made of sector-focused senior lenders that account for approximately 40 percent of the agricultural lending market.
“When a farm credit customer comes forward with a project or growth event and they are looking for some different type of capital to fund that event, that’s when Proterra might come in,” Logan said.
Proterra’s credit strategy is focused exclusively on the US, he added, stressing the positives provided by the diversity of the country’s regions and the emergence of opportunities related to booming demand for new healthy, plant-based and animal welfare-friendly offerings.