financing agribusiness in serbia and montenegro levent aydinoglu, associate banker belgrade, 27 may...
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Financing Agribusiness in Financing Agribusiness in Serbia and MontenegroSerbia and Montenegro
Levent Aydinoglu, Associate BankerLevent Aydinoglu, Associate Banker
Belgrade, 27 May 2004Belgrade, 27 May 2004
Structure of the presentationStructure of the presentation
EBRD and agribusiness
EBRD experience in agribusiness financing in CEE and CIS
Selected agribusiness transactions
Opportunities for financing agribusiness in Serbia and Montenegro
Contact Information
What is the EBRD?What is the EBRD?
International financial institution, promotes transition to market economies in 27 countries from central Europe to central Asia
Owned by 60 countries and two inter-governmental institutions
Capital base of €20 billionCumulative commitments €22 billion
Unaudited September 2003
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Catalyst for changeCatalyst for change
EBRD investments have attracted an additional € 47 billion from domestic and foreign investors
The EBRD uses donor funding to assist project preparation and catalyse foreign investment
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'98 '99 '00 '01 '02
Mobilised
EBRD
Cumulative funds mobilised € 47.1 billion
Financial flexibility - LoansFinancial flexibility - Loans
Financing structured to meet project-specific needs including repayment schedules
Tailored to particular situation of the country/region and sector
Pricing reflects risks with project, borrower and country
Wide range of loans
fixed or floating rate loans
choice of currencies
short to long-term
maturities
AAA-rated multilateral institution founded in 1991, owned by 60 national and two supranational shareholders
Playing a leading role in Central & Eastern Europe (CEE) and the former Soviet Union (CIS)
Business oriented - working closely with private sector clients on commercial transactions
EBRD and AgribusinessEBRD and Agribusiness
EUR 3.25 bn invested in 205 projects.
EUR 56.1m invested in 6 projects in Serbia and Montenegro.
Serbia is the 12th largest recipient of the EBRD financing in the agribusiness sector following Russia, Ukraine and Poland.
EBRD and AgribusinessEBRD and Agribusiness
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95 96 97 98 99 00 01 02 03
EBRD annual investments in Agribusiness (million €)
Food Processors
Agricultural Inputs
Production
Primary Processing
Foodservice Distribution
Packaging Production
Consumer
•seeds•fertiliser•farm machinery•agricultural chemicals•bio-tech•distributors
•grains•oilseeds•livestock•poultry•dairy•fish•horticulture•produce
•crushers (sunflower, soya bean)•millers•grain handling•produce market
•meat•bakery•snacks•beverages•frozen foods•fish•pet food
•glass bottles & jars•PET bottles•cans•carton containers
•restaurants•supermarkets•institutions•distributors
EBRD and agribusiness: EBRD and agribusiness: Financing of entire food chainFinancing of entire food chain
EBRD and agribusiness: EBRD and agribusiness: Financing local & foreign market leadersFinancing local & foreign market leaders
Recent Agribusiness Projects in Serbia and Recent Agribusiness Projects in Serbia and MontenegroMontenegro
Name of Project EBRD Finance (Euro)
Debt/Equity
Serbia/EPH/Warehouse Receipt Programme
6m Debt
Fresh & Co 10m Equity
Frikom 10.1m Debt
Grand 7m Debt
Marbo 7m Debt
SFIR 16m Debt
Grand Coffee
Local entrepreneur with successful track record
Serbia and Montenegro's largest coffee company
€7 million debt to finance domestic and regional expansion
Selected Investments in 2003Selected Investments in 2003
Bonduelle Selected Investments in 2003Selected Investments in 2003
Bonduelle, world’s top processed-vegetable producer
€15m equity investment
For the construction of a greenfield vegetable canning plant, located in the Kransnodar region, Russia
To produce 60,000 tonnes of fresh packaged vegetables
Financing to DOEP (Cereol’s subsidiary) leading producer of refined edible oil in Ukraine
A syndicated loan of US$ 43m, structured and arranged by EBRD, to co-finance purchases of sunflower seeds and related working capital requirements.
Selected agribusiness transactionsSelected agribusiness transactions
(1) Working capital:(1) Working capital: lack of security and of financial support to farming and primary
processing sector
(2) Government policies:(2) Government policies: changing laws/regulations, complex restructuring of agri-
conglomerates, EU accession talks cause further uncertainties
(3) Production efficiency/competitiveness:(3) Production efficiency/competitiveness:
structural reasons for lower yields
(4) Global industry challenges apply as well…(4) Global industry challenges apply as well… bargaining power of food producers vs retail chains
EBRD experience in agribusiness EBRD experience in agribusiness financing: Key issues facedfinancing: Key issues faced
Strong processors are the key to a healthy sectorStrong processors are the key to a healthy sector– provide a sustainable market for agricultural products
It is better to focus on the best companiesIt is better to focus on the best companies– with long term views, and competitive advantages (marketing, distribution)
There are no standard financial solutionsThere are no standard financial solutions– agribusiness companies often need tailor made solutions
We have to understand the whole food chainWe have to understand the whole food chain– to make sure sufficient quality supplies are available
A better legal and institutional framework is a mustA better legal and institutional framework is a must– For farmers and processors to get the financing they need
EBRD experience in agribusiness EBRD experience in agribusiness financing: Key issues learntfinancing: Key issues learnt
Opportunities for financing agribusiness in Opportunities for financing agribusiness in Serbia and MontenegroSerbia and Montenegro: Traditional finance: Traditional finance
Debt Senior, subordinated,
convertible
Working capital
Long-term maturities
Denominated in major currencies
Flexible tailor-made security package
Political risk guarantees
Equity Common stock
Preferred shares
Mezzanine financing
Large minority positions
Political risk guarantees (portage equity)
Co-financing / Syndications
Substantial in-house syndication department
Equity / debt underwriting
Large number of high quality food producers with well known branded product
Increasing penetration of organised retail and the opportunities and challenges this creates
Restructuring of food industry is not complete yet.
Financing needs are enormous.
Opportunities for financing agribusiness Opportunities for financing agribusiness in Serbia and Montenegroin Serbia and Montenegro
Opportunities for financing agribusiness in Opportunities for financing agribusiness in Serbia and MontenegroSerbia and Montenegro: Structured finance: Structured finance
Example: Warehouse Receipt Programme
WR1 2
3
€
€
Sale 4 5
6
WR
WR
€
Risk participation with local bank OR
credit line to the local bank
Example: Suppliers financing
1
€
Off-take +
Know
how
Guarantee
€
Loan
2
3
4
€
Funded or un-funded participation
Opportunities for financing agribusiness in Opportunities for financing agribusiness in Serbia and MontenegroSerbia and Montenegro: Structured finance: Structured finance
Levent AydinogluTel: +44 207 338 7021Email: [email protected]
Associate Banker, Agribusiness Team
ContactsContacts