Project Description
USD 100 million revolving loan to finance part of the working capital needs of the subsidiaries of Louis Dreyfus Company B.V. ("LDC", "the Company") active in Bulgaria, Egypt, Kazakhstan, Poland, Romania, Tajikistan, Türkiye and Ukraine for the merchandising activities (including purchase, storage, processing and transportation) of agricultural commodities from and / or in(to) these countries.
Project Objectives
Working capital needs associated with merchandising of agricultural commodities are seasonal and at prices that fluctuate throughout the year. The project will provide stable working capital financing for merchandising of agricultural commodities from and/or in(to) the project countries listed above where local funding of agricultural activity is constrained.
Transition Impact
ETI score: 69
The transition impact of the project is based on its contribution under the "Competitive" and "Resilient" qualities in the main agricultural supply chains among the project countries.
As part of this project, LDC will undertake to steadily increase the volume and share of cotton it purchases in Türkiye that is certified under the Better Cotton Initiative (BCI) and the associated number of cotton ginners and (indirectly) farmers from which LDC will purchase BCI-certified cotton in Türkiye, as well as to cover half of the costs for a capacity-support program during the next three years that will focus on increasing the awareness and training of Turkish cotton farmers to adopt BCI standards. Such measures will also translate into markedly supporting Turkish cotton production and supply to become more sustainable and resource-efficient. Financing of cotton purchases in Türkiye as part of this project will also support the livelihoods and liquidity of many cotton farmers and ginners located in areas impacted by earthquakes in the country.
Meanwhile, in the context of this project but subject to capacity and safe conditions for shipment operations allowing to do so, LDC intends to increase its grain and oilseeds purchasing in and exports from Ukraine, while aiming for a higher share of such purchases directly from more small-medium farmers. Doing so will provide important support to Ukrainian grain farmers through the sale of their grain harvests and access to liquidity, in a context of more limited financing under the prevailing war conditions in Ukraine. In parallel, this is expected to also support greater access to food in grain deficit countries (such as Egypt but not only) in the Mediterranean, (North) Africa, Middle East and Central Asian regions, given the important grain trade flows in which LDC is present from Ukraine into the aforementioned regions.
Client Information
LOUIS DREYFUS COMPANY SUISSE SA
Founded in 1851 and active in more than 100 countries, LDC (www.ldc.com) is a leading global merchant and processor of food and agricultural products, which originates, processes, transports and trades more than 80 million tons of products annually.
EBRD Finance Summary
USD 100,000,000.00
Up to USD 100 million, 3 to 5 year, revolving loan to partially finance the working capital needs of LDC's subsidiaries in relation to merchandising of agricultural commodities from and / or in(to) the project countries listed above.
Total Project Cost
USD 300,000,000.00
Actual financing needs will fluctuate based on commodity prices and volumes, but are estimated at ca. USD 300 million.
Additionality
The additionality of the project is derived from its financing structure, risk mitigation and standard setting features. The Bank offers a significant financing amount dedicated to merchandising of agricultural commodities in the Bank's region of operations across the eight project countries listed above, which are prone to local funding constrains for agricultural activities. The Bank's loan will have a longer tenor than often shorter working capital loans provided by local banks for agricultural activities, while the Bank's loan can also be utilised by LDC in Turkish lira and Egyptian pounds. In addition, the Bank's loan incorporates (temporary) repayment deferral clauses in case of export bans from certain project countries of relevant agricultural commodities. Lastly, the conditions agreed by LDC under this project, to support higher uptake and production of BCI-certified cotton in Türkiye, are expected to drive and demonstrate better environmental and social standards in the Turkish cotton sector compared to the present.
Environmental and Social Summary
Categorised B and Low Medium Risk.
LDC is well known to the Bank through previous transactions and the Company's management of environmental and social (E&S) issues to both directly managed activities and its supply chain has proved satisfactory to the Bank. LDC has put in place a comprehensive global Safety, Health and Environment ("SHE") Management System with core elements that address the Bank's Performance Requirements (PRs).
In the context of this project, the purchase, import and export of grains and oilseeds is not associated with significant environmental or social impacts, while the key E&S risks will be around the cotton supply chain, with well-understood risks around labour management, water usage and chemical storage, application and disposal. Through this project, LDC will considerably increase the share of cotton it procures in Türkiye that is certified under the Better Cotton Initiative (BCI). The Company will also support efforts to increase awareness and training of cotton farmers in Türkiye to adopt BCI standards. These actions will promote more sustainable and resilient cotton production in Türkiye.
LDC has a good understanding of its exposure to sustainability issues and deforestation in its supply chains, with advanced traceability systems in place, and reliance on sustainable sourcing certifications that mitigate potential risks associated with deforestation and conversion of high carbon stock / biodiversity land. Among others, LDC has made public commitments to eliminate deforestation and native vegetation conversion for agricultural purposes from its supply chains by the end of 2025, and to reduce its Scope 1 & 2 greenhouse gas (GHG) emissions by 33.6% by the end of 2030 (compared to 2022 baseline), in line with the level of ambition from SBTI. LDC has also indicated its intention to set scope 3 GHG emission reduction targets in the medium-term.
To address selected monitoring issues identified during due diligence, the Company has agreed to implement a Climate Risk and Paris Alignment Monitoring Plan. Reporting under this plan will be provided alongside the standard annual E&S reporting to the Bank, in order to confirm ongoing compliance with the Bank's PRs and other policy requirements.
Technical Cooperation and Grant Financing
Technical cooperation in the form of a capacity-support program estimated at ca. EUR 200,000 during the next three years that aims to increase the awareness and training of Turkish cotton farmers to adopt BCI standards is being prepared in cooperation between United Nations Development Programme (UNDP) Türkiye, the Bank and LDC, and in partnership with Iyi Pamuk Uygulamalari Dernegi (IPUD) / the Good Cotton Practices Association (BCI strategic partner in Türkiye). LDC will contribute half of the costs of this capacity-support program.
Company Contact Information
Florence Genestin, Head of Financing and Treasury for EMEA
florence.genestin@ldc.com
+41 (0)58 688 28 71
https://www.ldc.com
29 route de l'Aéroport, P.O. Box 236, 1215 Geneva 15, Switzerland
PSD last updated
11 May 2023
Understanding Transition
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