deals
ANFAS in Turkish pilot
Receivable success
What's NewS Issue 9 October/November 1999 I
RI has been instrumental in providing
the consulting, financial modelling,
and the export- and project-financial
support for a substantial dairy and beef
project in Turkey. The project in the South
l ast Anatolian GAP region will function
both as a pilot to illustrate to local farm
ers the opportunities and efficiency associ-
ated with developing these F&A sectors.
In addition, it will provide meat and milk
produets at affordable prices. It was RI's
task to strategically assess the project's
long-term feasibility in the Turkish market
and to structure a tailor-made hnancing
package by reviewing the several financing
>ptions available. RI's CANFAS concept,
cooperation of the Agri Project Finance
Team, Food and Agribusiness Research
and RIAS, proved successful in sourcing
global sector and product knowledge
within the bank and forming a temporary
project team with corporate finance.
At full operation, the farm will involve a
1,000-head dairy herd and a 6,000-head
feedlot, and a total investment of around
USD 17.4 million (excluding working
capital). The two Turkish sponsors, who
originally turned to us with an advisory
mandate, are KOC Holding A.S, the
largest automobile producer and food
retailer in Turkey with a Consolidated
turnover of USD 6 billion in 1998, and
ATA Construction Ltd. Sti., which is well-
known for its construction of the Ataturk
dam, the second largest water infrastruc-
ture project in the world. An Israëli
consultant, International Projects
Consultancy, designed the technical and
operational aspects of raw milk and beef
fattening production and will deliver
management for the first six years.
The animal husbandry and red meat
sectors in Turkey have been neglected for
rnany years. Most primary producers are
highly subsidized erop farmers with
strong political clout, and there has been
little or no incentive to use grains for
value added livestock production to date.
Turkey's livestock industry faces problents
due to a combination of factors - a frag-
mented industry structure, poor genetics,
high grain prices and a lack of know-how
in farm management. The result is exorbi
tant beef prices causing stagnation and
even a decline in dentand, even though
population growth is amongst the highest
in the world. Once prices come down,
with on-farm feed production and a short
supply chain, beef production and pro
cessing will have enormous potential,
especially in the GAP region where beef is
in short supply and demand is growing.
RI proposed opportunities for a low cost
supply chain with KOC's meat processing.
Today, most milk produets in the region
are home-made and home-consumed; the
key constraint for the dairy industry,
mainly controlled by small dairies, is the
very low supply of raw milk, which is
usually retailed at local markets (bazaars).
As the project will produce high quality
milk in terms of fat, bacteria and dry mat
ter content, but will not be able to com-
mand a high premium in a relatively poor
CANFAS in Turkey - teampiayers Oya Figen (r)
and Esin Yildirim Uzun
region, RI advised further integration in
the dairy value chain by processing raw
milk into a high-quality product such as
cheese or UHT milk. This would shorten
the supply chain and ntake processing
more cost efficiënt. The sponsors of the
project will be investing in this production
line when the project comes on streani.
Rabobank's invoivement in this project is
notable for both its knowledge-based con
sulting and for the financial packaging.
Our Toronto operation recently
concluded an important deal which
substantially raises our profile in the
Canadian F&A sector. It is set against the
background of a far-reaching re-regula-
tion of Canada's grain distribution
market. Three valuable Rabobank clients
are positioning thentselves to take full
advantage of the resulting opportunities
by extending their economies of scale, and
accommodating their business scope.
The companies involved are:
Saskatchewan Wheat Pool (also known as
Saskpool), United Grain Growers (UGG),
^nd James Richardson International (JRI).
^ctmg on behalf of the Canadian Wheat
Board (CWB), a government agency that
has a trading monopoly on Canadian-
grown non-feed wheat, durunt and barley,
these companies, which rank among the
foremost distributors in Canada, purchase
grain from farmers. They pay for it on be
half of the CWB with 'cash tickets', which
become CWB receivables. Rabobank
Canada, which started operations in April
1998, recently helped the three companies
and their CWB counterparty to finance
this procedure on financially more attrac-
tive terms. Specifieally, the method chosen
was an asset-backed special purpose com-
pany, known as Storm King Funding,
which has been established with the ex
press purpose of purchasing the CWB re
ceivables. Storm King issues asset-backed
CP onto the market, which are secured to
their full value by the government-backed
receivables, together with enhancing
letters of credit side by Rabobank as well
as the Royal Bank of Canada. By issuing
these letters, we were thus able to leverage
our AAA-credit rating. Says Govert
Verstralen, our Toronto-based Senior
Relationship Manager, 'These deals only
come up a few times a year. We were very
happy that we were invited to take part,
and to know that the deal has been able
to enhance our already solid credibility on
this important F&A market.'
