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Cordiant Global Agricultural Income targets $300m in new IPO

Cordiant Global Agricultural Income targets $300m in new IPO – A new trust, Cordiant Global Agricultural Income, which aims to seek an attractive yield, with potential capital growth, by providing secured medium-term finance to the global agricultural sector, has announced its intention to float.

The company will seek to promote more sustainable crop production and help address a capital solutions gap which exists in the agricultural sector in select regions. It will provide finance for crop inputs and for capital investment in new technologies and infrastructure which help increase crop yields and have a sustainable benefit.

Finance will be provided to medium to large-scale producers of soft commodities, fruits and vegetables with long track records, who export, and will be re-paid directly from international, typically investment grade, counterparties such as supermarket groups, large food wholesalers and commodity traders through off-take agreements which are agreed at the point of entry into the ‘agricultural loan’. A strong package of security and collateral over land and crops will be taken in respect of each agricultural loan, ensuring for a highly secured investment.

The company is targeting an issue of 300 million ordinary shares at an issue price of US$1.00 per ordinary share through a placing, offer for subscription (including an intermediaries offer) and subscription share issue. In subscribing, investors in the Issue will also subscribe for subscription shares on the basis of one subscription Share for every five ordinary shares subscribed. The company will seek admission of thesubscription shares to the standard listing segment of the Official List and to trading on the Main Market.

Cordiant Global Agricultural Income will also target a 6.5% dividend per year (although a 4% dividend in the first 12 months following IPO) and an NAV total return of 10% per year once fully invested, with inflation protection through floating rate loans.

It will have a strong focus on ESG through financing investment in new technologies and infrastructure which have a sustainable benefit and/or crop yield enhancement such as precision farming technologies and by-product to energy conversion technologies.

Manager, Cordiant Capital, who also managers Cordiant Digital Infrastructure, said: “Feeding a growing global population whilst protecting the environment is one of the defining challenges of our age. By focusing on established producers with strong sustainable farming methods, Cordiant can deploy its sector expertise to increase food security and generate attractive investor returns.”

Key Highlights

  • Finance will be provided to medium to large-scale crop producers in prime farming regions who have annual revenues typically in excess of US$50 million, long track-records of crop production (typically in excess of 10 years), sound environmental and agricultural practices and are located in major agricultural export countries (each an “Agricultural Loan Counterparty”).
  • A key feature of the Company’s Agricultural Loans will be that a pre-agreed off-take agreement will be in place with an off-taker (an “Off-taker“) at the point of entry into of the relevant loan. The Agricultural Loan Counterparty’s obligations under the loan will be met by the delivery of physical crops to the contractual Off-taker who will pay the Company directly for the agreed volume of such crops in US Dollars. The crops delivered will typically account for 5 to 30 per cent. of the Agricultural Loan Counterparty’s total crop production or originated crop volumes for the year.
  • The Off-takers will be international, typically investment grade, counterparties such as supermarket groups, global commodities trading houses, or large food wholesalers.
  • A strong package of security and collateral in respect of each Agricultural Loan will be taken which will typically consist of:
    • A first ranking charge over farmland in excess of 150 per cent. of the loan value;
    • A pledge over the crops equal to 130 per cent. of annual debt service (principal and interest); and
    • A commercial off-take contract pledge of 150-200 per cent. of the annual debt service (principal and interest).
  • The Investment Manager has a strong track record in agricultural finance having deployed in excess of US$475 million in the strategy across private funds with a specialist team made up of agricultural specialists and financiers operating out of São Paulo (Brazil) and Montreal (Canada). The Investment Manager was an early adopter of key ESG initiatives including the UN PRI and SASB.
  • Seed assets with a principal value of in excess of US$100 million will be available for acquisition by the Company following Admission, and are intended to generate an immediate income stream for the Company. These seed assets will be participations in a portfolio of eight existing Agricultural Loans held by other funds managed by Cordiant and will be subject to an option agreement which the Company may exercise following Admission.
  • In addition, through its origination network, the Investment Manager has identified and is evaluating, a pipeline of potential Agricultural Loans with an aggregate principal value in excess of US$800 million.
  • The Company will have no exposure to livestock farming and will have strict due diligence processes to ensure compliance with environmental and labour laws and sound agricultural practices.
  • The Subscription Shares are intended to provide an opportunity for additional value to IPO investors should the Ordinary Shares trade at the necessary premium to the issue price in the first 10 months.

 The Global Agricultural Finance Opportunity

  • Food security has never been more critical – the global population is expected to increase to 9.7 billion by 2050. A primary goal of the United Nation Sustainable Development Goal (“UN SDG”) 2 is to end hunger, achieve food security and improved nutrition.
  • The need for sustainably grown food is increasingly important – investments in improving crop yields and improving farm management is expected to drive 87 per cent. growth of crop production rather than cropland expansion (6 per cent.).
  • The majority of developed economies are net importers of basic agricultural food and fruits – whilst many regions do produce large amounts of agri-products, due to factors such as high population density and increased focus on nutrition, such regions are often net importers of a range of crops, fruits and vegetables.
  • Over a number of years, many Latin American countries have emerged as major exporters of certain soft commodities and fruits and Latin America is expected to reinforce its position as the world’s prime supplier of key agricultural commodities over the next ten years due to advantages such as favourable climate conditions and lower population density.
  • However, unlike many other high production agricultural regions such as the US, Europe and Asia, government subsidies are not widely available to crop producers in Latin American countries. Lack of availability of medium-term capital in these regions can be a major constraint for medium to large-scale crop producers where other financing options are typically short-term and therefore not suitable for longer-term investment.
  • The Cordiant agricultural finance strategy allows medium to large-scale crop producers to access finance for longer-term capital investment on attractive terms.

The Investment Strategy

  • The countries in which the Company will target investment will be major agricultural producers and exporters with modern logistics infrastructure, a range of available Off-takers, over 20 years of production history and where conditions are conducive to providing sustainable financing on a secured basis. The agricultural regions targeted will have favourable crop production characteristics. The Company’s initial focus will be mainly in select Latin American countries including, Brazil, Peru, Chile, Mexico, and Colombia which meet all of these criteria. However, the Investment Manager will continue to monitor other regions on a case by case basis.
  • The Company will finance agricultural infrastructure and technology investments for crop producers to help drive efficiencies with part of the financing for shorter-term working capital purposes such as funding seed inputs. The longer tenure investment of the Company’s Agricultural Loans will enable a continuous flow of agri-products to improve more sustainable food supply and assist in achieving food security.
  • The crops to be financed will be soft commodities and fruits and vegetables, such as: sugar / ethanol; soybean meal; corn; millet; blueberries; avocados; vegetables; citrus fruits; and coffee.
  • Cordiant pursues an active management strategy through: on-the-ground presence with the Cordiant Agricultural Finance Team based in São Paulo regularly attending locations across Latin America in person to review operations; extensive use of technology, including satellites; controlling loan funds; negotiating and implementing key arrangements such as off-take contracts and hedging, where appropriate, on behalf of an Agricultural Loan Counterparty.

The Board

The Board of the Company which comprises four independent non-executive directors has a diverse range of skillsets and extensive knowledge across the asset management, agriculture and investment trust sectors.

  • Geoffrey Campbell (Chairman) – is an experienced non-executive director having held various positions on both public and private companies. He was non-executive chairman of DRDGold Limited, between 2005 to 2021, during which, DRDGold transitioned from a marginal underground miner to a high-tech volume surface reclamation operation. Geoffrey is also founder/owner at Oxford Abstracts, which delivers online abstract submission services for the organisers of academic and scientific conferences. Prior to this, Geoffrey has held a variety of positions, including 5 years at Merrill Lynch Investment Managers as research director and senior fund manager of the global Gold and General Unit Trust. Geoffrey holds a B.Sc.honours in Geology with Geophysics from the Royal School of Mines, Imperial College, London.
  • Audrey McNair (Non-executive Director) – is an experienced non-executive director with significant experience in shaping a company’s risk management framework over her 40-year career. Currently, she is audit chair and non-executive of both Octopus Renewables Infrastructure Trust Plc and Jupiter Emerging & Frontier Income Trust Plc. She is also a member of the audit committee at British Friendly Society, an insurance mutual. Previously, she was non-executive director and chair of risk and compliance of Earl Shilton Building Society. Over the course of her executive career, Audrey has held several significant positions including Global Head of Business Risk, Head of Internal Audit EMEA at ABRDN and Head of Treasury Operations Unicredit and Head of Internal Audit HypoVereinsbank London. Audrey holds a MA honours in French Language and Literature from St Andrews University.
  • Elodie Grant Goodey (Non-executive Director) – is a social performance professional with 25 years’ experience in societal risk assessment, social performance, human rights, government, and civil society relations. She has a valuable track record of managing key stakeholders at executive and frontline levels in a FTSE100 company. Elodie is currently the Senior Independent Director of SolGold plc, a Non-Executive Director for RCF Acquisition Corp and member of the Advisory Board to Celicourt Communications. Prior to this, Elodie was formerly Head of Societal Issues and Relationships at BP until 2015, leading social policy management, social risk assessment, advocacy and stakeholder engagement. In this role, she was responsible for the company’s position on societal issues such as human rights, transparency and accountability and led the cross-functional team that drafted business and human rights policy, impacting communities and supply chains in more than 100 countries. Previously, Elodie worked for the BBC World Service and volunteered for a number of human rights NGOs. As a consultant over the past five years, Elodie has worked human rights and social performance projects for the extractive industry in Africa, Latin America and Europe. Until January 2020, she was Non-Executive Director for Amerisur Resources, an E&P company operating in Colombia. Elodie holds a BA in History and Politics from University of London (UK) and the Sorbonne (France).
  • Alex Eito (Non-executive Director) – is an experienced commodity trading professional with over 30 years’ experience in derivatives and physical trading, with a particular focus in the agricultural sector. Alex was previously the chief commercial officer of Solaris Commodities S.A. Prior to Solaris Commodities, Alex held the position of director at Alvean managing their global trading team specialising in white sugar trading from June 2014 to November 2019. In 2011, Alex launched the commodities hedge fund LCI, holding the position of partner and portfolio manager. At its peak, Alex raised US$145 million for both Discretionary Portfolio and Active Index. Prior to this, Alex was the MD of Global Agricultural Commodities at Merrill Lynch, MD of the sugar division at Noble Group, and held various positions at ED&F Man and Cargill. Alex holds an undergraduate degree in International Trade from UADE, Buenos Aires.

The Investment Manager Agricultural Finance Team– Key Principals

The key members from the Investment Manager’s Agricultural Finance Investment Team who will be responsible for executing the Company’s investment strategy are:

  • Patrick Funaro (Managing Director) – has worked in Latin American commodities markets for the past 27 years, mostly based in São Paulo, Brazil. Throughout his career, Patrick has led various structural changes in the agricultural market in Latin America, such as introducing and connecting producers to the derivative markets to manage risk and volatility of operations, promoting Brazilian soybean exports to China, and founding the Brazilian Sugar Club, the largest sugar association in Brazil. Patrick was previously a partner at Finex Commodities Partner, heading the Latin America teams, and providing risk management instruments to commodity exporters. Before joining Finex, Patrick was Managing Director, Head of South America – Global Energy and Commodities group at Natixis Bank Brazil, developing and overseeing the Latin American credit business. He held senior appointments at ICAP Brazil (Director), Bioenergy Development Fund (Founder and CEO), Société Générale, Fimat Group (SVP and Head of LaTam) – now Newedge group, and CCF Bank. Mr. Funaro has founded, launched and led several businesses over the years, covering physical trading, derivatives, private equity, debt structuring and distribution. Mr. Funaro holds a Business Administration Degree and a DESS (BA) in Management of New Information Technology from University Paris –Dauphine (France).
  • Cédric Garnier-Landurie (Managing Director) – has worked for 10 years in the investment banking and investment management industry through management, investment, and operational roles. Cédric is the Co-Head of Agriculture Finance at the Investment Manager. Previously, Cédric was Chief Revenue Officer and founding member of Knox Industries, a digital risk management company offering insured digital asset custody solutions and insured infrastructure. Knox was backed by Fidelity Investments, Initialized Capital and iNovia Capital. Cédric worked as an investment banker with merchant banking boutique Cheverny Capital focused on the technology, media, and telecommunication (TMT) sector, food and food retail, engineering and industrials, and financial services sectors. Cédric has gained broad experience in origination, M&A, debt and equity financings, and investing in companies across North America, Europe, Latin America, and Africa. Cédric brings expertise in understanding market structures, and structuring complex investment opportunities across industries, and jurisdictions. Cédric has a Bachelor of Commerce, Honours in Investment Management from the McGill University (Canada), and holds the Chartered Financial Analyst designation.
  • Stephen Pout (Managing Director) – has worked with commodity finance for over 20 years. He worked as a credit analyst in Mizuho’s International Finance Group in London, working on over 40 syndications per year for sovereigns, financial institutions and top corporate borrowers in Africa, Middle East and Eastern Europe. After Mizuho, Stephen worked in commodity finance in Absa Bank, working on many transactions in Africa, South America and Mexico. After a short stint at KBC, Stephen moved to Macquarie to set up the structured finance business in the grains market. While at Macquarie, Stephen worked with structured commodity finance and established the grain financing business. Stephen was instrumental in business development for the Macquarie Crop Fund, now known as Southern Cross Grains. Stephen was a partner of Agriservice, a Brazil-based grains brokerage that was acquired by Gavilon in 2011, becoming Treasury Director of Gavilon Brazil in 2014, Stephen established Bufalo Grains as a vehicle for investments in grain export logistics, supported by investment from Finvest, a local asset manager, and Goldman Sachs. Stephen has a Bachelor of Commerce from the University of Newcastle (Australia), and an MSc in Finance from London Business School.
  • Matias Eli (Risk Managing Director) – has worked within the agriculture commodity sector for over 25 years. He started his career at Louis Dreyfus trading ethanol, cocoa and rice until 1995. After Louis Dreyfus, Matias joined Bankers Trust where he built the first OTC derivative franchise for an American bank, offering risk management solutions to agricultural producers. After the 1998 Russian crisis, Bankers Trust was sold to Macquarie. At that time Matias was responsible for all Latin American operations, out of São Paulo, and Buenos Aires. During the following 10 years at Macquarie, Matias expanded Macquarie into structured finance, offering complete suites of financial products to agricultural producers (mainly in Brazil), offering hedging instruments for the top 30 producers in Brazil as well as credit lines, generating a US$20 million annual business. Matias founded IBP in partnership with a team of physical and derivative brokers. IBP was focused on providing prime Brazilian clients with top execution of listed and exotic options as well as credit lines to cover initial and variation margins on the exchange. In 2014, Matias was asked by ED&F Man (UK) to launch their new capital market company, called ED&F Man Capital Markets, heading the operations in Latin American countries before becoming Global Head of Agricultural Risk Management at ED&F Man Capital Markets with offices in Brazil, Paraguay, Argentina, Miami, London, Dubai, and Switzerland and a team of more than 50 employees, and revenues in excess of US$30 million per year and a portfolio of more than 150 clients globally. During his time at ED&F Man, Matias structured the company’s fixed income operation, focused on origination and structuring of short-term debt to agricultural producers in Brazil and Central America. Matias holds a Business Administration Degree from Pontifícia Universidade Católica (PUC-SP) (Brazil).

The Agricultural Finance Investment Team is supported by the following Senior Executives of the Investment Manager:

  • Jean-François Sauvé (Managing Partner and Co-CEO) – has over 25 years of experience in the financial industry. He began his career at Barclays Bank in Toronto. He subsequently joined McLeod Young Weir Limited (rebranded ScotiaMcLeod Inc. and later the Scotia Capital Markets) and in 1993, became a Director of the Corporate and Government Finance Department. Thereafter he was named President of Pictet Canada L.P., where he was responsible for the North American operations of Pictet & Cie, Switzerland’s foremost private bank. Mr. Sauvé is also a principal advisor to a major European family office. He is Chairman of the Jeanne Sauvé Foundation. He completed his degree in Business Administration at l’école des Hautes études Commerciales (HEC Montréal) and later earned an MBA at INSEAD in Fontainebleau, France.
  • Benn Mikula (Managing Partner, Co-CEO and Head of Investments) – has, over the course of his career, served as Managing Director and Head of European Technology Investment Banking at JPMorgan in London as well as Managing Director and Head of Technology Equities Research at RBC Capital Markets (where he was the #1 ranked analyst in the sector for several years and developed the Whistler Technology, Media & Telecoms Conference). He has also held the directorships of several companies including MegaBrands (MB – TSX), where he joined the board to work on that company’s successful financial restructuring. (In 2014 Megabrands was acquired by Mattel in a US$460 million transaction.) Other board roles included Coradiant (acquired by BMC Software in 2011) and Fibermedia (a New York-based firm that operated six data centres before merging into vXchnge in 2014). He is currently a director of Sanimax Industries (a large, family-owned agro-industrial concern with operations in Canada and the US) and a member of the advisory board and senior advisor to the CEO of hybrid cloud orchestration firm CloudOps. He has variously served as a member of the fundraising boards of the Montreal Neurological Hospital & Research Institute and the Montreal Children’s Hospital, President of the Acorn Society, a Special Adviser to a member of the Shadow Cabinet (U.K. Parliament) and a patron of the Royal Shakespeare Company. He holds both a B.A. and an M.A. from McGill University.
  • Stephen Foss (Managing Director, Structuring and Syndication) – brings over 30 years of experience in capital markets and investing, most notably at RBC Capital Markets, where he was a senior Managing Director. He was responsible for the International Equities business for Europe and Australasia and subsequently led a senior client coverage effort for RBC’s investment banking group with a particular focus on sovereign wealth funds. Mr Foss oversaw a substantial build-out of RBC’s capabilities in Europe and served on the firm’s European Operating Committee and Global Equity Operating Committee. He subsequently joined the partnership of Merlin Partners LLP, a merchant bank. Stephen was a member of the boards of Colombia-based Amerisur Resources plc, Octant Energy plc (based in East Africa) and is on the board of New & Lingwood and Nutraformis Ltd. He has previously worked for the Sydney Stock Exchange, the Bank of Montreal in Canada and the UK, and has served as a director of BOE Securities in South Africa. Mr Foss has a BA (Hons.) from the University of Western Ontario.
  • Lori Trotter (Senior Vice President and Director of Communications) – has over 25 years’ experience in the investment management industry, first with AMI Partners–a Montreal-based investment manager servicing both institutional and retail clients–before joining the Investment Manager in 2001. Over the years, Lori’s responsibilities at the firm have grown to include oversight of the Communications, Investor Relations and ESG & Impact functions. Lori began her career as a Procurement Officer in a large tech company and was responsible for negotiating and administering long-term contracts with international suppliers. Lori has a B.A. from McGill University.
  • Peter Barrett-Lennard (Managing Director) – has close to two decades of experience in financial markets. He joined the Investment Manager from Merlin Partners LLP, where he was a Partner. Prior to Merlin Partners, he spent a decade at RBC Capital Markets, where he held senior roles in the advisory group focusing on agriculture, industrials, and the energy/materials complex. He gained broad experience in origination, M&A and debt and equity financings for companies in Europe, Asia, and Africa, and brings particular expertise in structuring complicated investment opportunities in emerging market economies. He joined RBC Capital Markets from PWC, where he was a Manager in Corporate Finance. He holds a BCom (Finance) from the University of Western Australia.

Sustainability and ESG

The Company will be designated as an Article 8 “light green” fund in accordance with the Sustainable Finance Disclosure Regulation (“SFDR“). The European Supervisory Authorities (being the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority) have defined SFDR Article 8 funds as financial products that promote, amongst other characteristics, environmental and/or social characteristics, so long as the companies in which investments are made follow good governance practices.

The Investment Manager, on behalf of the Company, intends to achieve this through the integration of sustainability risk indicators into investment decisions (including environmental, social and/or governance risks and/or considerations), as well as positive engagement with the Agricultural Loan Counterparties to promote efficiencies within and/or introduce more sustainable elements to farming practices.

Prior to providing finance to an Agricultural Loan Counterparty, the Investment Manager will assess the Agricultural Loan Counterparty against a number of ESG KPIs including:

  • Compliance with local and international environmental laws;
  • Adherence to labour laws and practices;
  • Protection of natural water sources;
  • Maximisation of by-products for waste reduction;
  • Measures to preserve biodiversity; and
  • Use of best agricultural practices.

As part of the provision of finance to an Agricultural Loan Counterparty, the Investment Manager will assess the use of proceeds provided to ensure that a portion of the funds are utilised to promote more sustainable crop production. This assessment will be made on a case by case basis depending on the crops being produced and the intended use of proceeds.

Cordiant supports an end to deforestation and the promotion of biodiverse ecosystems. The Cordiant Group is one of the 57 signatories of the Cerrado Manifesto and is committed to halting forest loss associated with agricultural commodity production and to working with industry, producers, governments and civil society to protect globally important natural landscapes (such as the Brazilian Cerrado) within a framework of good governance and land planning policy.

Through its ESG approach, the Investment Manager will seek to promote the following UN SDGs:

  • 2. Zero Hunger
  • 7. Affordable and Clean Energy
  • 8. Decent Work and Economic Growth
  • 9. Industry, Innovation and Infrastructure
  • 10. Reduced Inequalities
  • 11. Sustainable Cities and Communities
  • 13. Climate Action
  • 15. Life on Land

Further details of the Company’s ESG approach will be set out in the Prospectus.

Cordiant Global Agricultural Income targets $300m in new IPO

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