TFR Deal of the Year 2004: Favero Group, Paraguay

Feature

posted 23 Feb 2005 in Volume 8 Issue 4

Favero Group, Paraguay: Boosting Paraguayan soybean exports

MLA: ABN Amro

Borrower: Favero Group, Paraguay and Brazil

Deal size: $15m

Tenor: one year

Signing: 2 June 2004

The rationale behind this $15m secured pre-export finance pass-through facility was to finance the short-term working capital needs related to the export of the Paraguayan soybean. And the challenge was to do so in a market that did not have fluent access to financing.

The solution materialised in the form of a highly structured (and secured) transaction at a time when several financing sources for Paraguay had been reduced significantly in a market with very little liquidity. However, ABN Amro developed a highly structured and secure transaction, similar to those that it uses in neighbouring countries, to provide a competitively priced financing for Agro Silo Santa Catalina, the core company of the Favero Group and one of the largest soy gatherers in Paraguay.

It was the first global commodity-finance deal in Paraguay for ABN Amro and the first to come to market in Paraguay in the past several years as the country emerges from a recession. While still considered to have a rating “deep in non investment-grade territory” by Standard & Poors, Paraguay was upgraded to B-/stable/C in July 2004.

Given the limitations of the local debt market, this deal not only reaffirms Favero’s main goal of broadening its financing sources, but it will no doubt encourage others in Paraguay to seek more of this type of finance from the international financial market in the future.

According to Prabhat Vira, ABN Amro’s head of global commodity finance, “This was a unique structured deal to come out of Paraguay and demonstrates the applicability of structured commodity solutions to support exports in emerging markets.”