Long-term financing | Alliance Grain Traders consolidates loans and seeks new funds for emerging market initiatives
The world’s largest pulse crop processor has restructured its finances.
Alliance Grain Traders has secured $300 million in credit facilities from a consortium of banks and has launched a $125 million bond offering.
“It’s really a long-term financing strategy for AGT,” said company president Murad Al-Katib.
The $300 million comprises a $150 million revolving line of credit, $90 million of long-term debt to consolidate previous loans for acquisitions and expansions, $30 million for future acquisitions and expansions and a $30 million “accordion” to grow the credit facility at the discretion of the lenders.
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Al-Katib said the new credit facilities solidify AGT’s working capital and financing requirements for its business operations in Canada, the United States and Australia. They have a maturity date of Jan. 24, 2016.
“It really gives us balance sheet certainty,” he said.
In the past, the company’s available credit would fluctuate from year to year based on an annual review by lenders. The new credit facility gives AGT three years of peace of mind.
The $125 million bond issue also provides financial certainty. The principal amount of the notes, which offer a nine percent annual rate of return, is due in 2018.
Al-Katib said it was time to rebalance the company’s balance sheet by adding more long-term debt.
“If you look back at our history, we’ve raised a lot of our capital in the equity markets prior to this,” he said.
AGT raised close to $200 million through share offerings in 2008, 2009 and 2010.
The company said the bond offering has been well received and is expected to close this week. Money raised will repay existing debt and the remainder will be used as working capital.
“Cash will be key in the next 30 years,” said Al-Katib.
“The $125 million will be largely deployed into our emerging markets business.”
It will be used to bolster the company’s distribution network in Turkey, Russia, India and southern Africa.
Al-Katib expects pulse demand is on the rebound after suffering a setback during the Arab Spring, the European debt crisis and a period of currency devaluation in importing countries.
“A lot of those factors have started to resolve themselves and we’re expecting 2013 and 2014 to be much more positive,” he said.
“We’re now financed, we’re ready and we think the world is recovering. We’re very excited about the next two years.”
AGT bought 14 companies over the past five years, but there were no acquisitions in 2012.
Al-Katib said the funding is in place for future acquisitions, but the focus for the time being remains boosting asset use in Canada and expanding into the food ingredient business.
The first step down the food ingredient road will happen in the first quarter of 2013 with the commissioning of AGT’s pulse protein extraction facility in Minot, North Dakota.
AGT signed an agreement with Cargill Inc. in January to be the exclusive North American marketer of AGT’s pulse-based pet foods, branded feeds and aquaculture feeds.
“This is kind of the tip of the iceberg to start this initiative,” said Al-Katib.
