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Brazil Iowa Farms Case Study
History
Brazil Iowa Farms, LLC is an integrated agribusiness company headquarted in Royal, Iowa that owned and operated 22,550 acres of producing farmland and a cotton gin in the Brazilian state of Bahia. Grupo Iowa, as the company is known as in Brazil, was created in 2002 to provide U. S. agricultural producers a venue to participate in the growing agricultural climate that exists in the current economic model in Brazil.
The first Brazilian land acquisition took place in 2004 and since then, Brazil Iowa farms has continued to expand its presence in the western Brazilian region of Bahia focusing primarily on the production and ginning of cotton, as well as the production of soybeans and corn.
Needs
The company was is its second crop year and critically needed capital to finance crop inputs. So they approached Provident Group, which is a New York based specialty investment bank and advisory firm that focuses on capital raising and M & A assignments for middle market issuers located throughout the Americas. Provident Group identified three challenges facing Brazil Iowa Farms. Firstly, they had a thinly capitalized balance sheet. Secondly, commodity prices for cotton were depressed combined with a lack of quality off-takers with good credit profiles. And finally, Provident identified the lack of a recognized strategic and technical partner. Longer term, the company also needed equity capital to scale its operations by acquiring new land so they could create a business which could be exited via a strategic sale or local public issuance.
Solution
In early 2008 Provident Group announced the completion of a U.S.$50 million equity expansion financing deal. The capital represented commitments from two institutions for U.S. $25 million each. As well as raising the expansion capital, the deal enabled Brazil Iowa farms to refinance their existing debt with a U.S. $10 million 5-year debt facility structured to defer principle amortization. As well they raised U.S.$1million of equity from a strategic off-taker/advisor, which included a multi-year agreement that intermediated off-taking risk for both local and international off-takers for cotton
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