(Bloomberg) – Solinftec, the Brazilian agricultural technology company backed by private equity giant TPG, sells about 140 million reais ($ 27 million) of green bonds.
Inflation-indexed securities, denominated in local currency, use Solinftec’s agricultural receivables as collateral. This allows for maturities of up to six years, which is unusual for a Brazilian company the size of Solinftec, according to CFO Lais Braido.
“We’re funding our expansion to new customers and new products with long-term debt, and that’s great news for us,” Braido said in an interview.
Brazilian investors are looking for more profitable alternatives to treasury bills, as basic real interest rates remain below the rate of inflation. According to Anbima, the capital markets association, the sale of ARCs, like banknotes using farm receivables as collateral, jumped to around 4.8 billion reais through April, nearly double the amount of the same period last year.
Demand is even stronger for bonds from companies with good environmental, social and governance practices, according to Luiz Ferraz, managing director of bond distribution at Banco Itau BBA, who structured the transaction.
Solinftec’s technology connects machines used in the fields in real time to a platform it calls Alice, which coordinates production to reduce the use of fuel, fertilizer and seeds. Local weather forecasts help the company advise customers on whether to spray pesticides, for example, avoiding waste in strong winds or rain, and preventing produce from spilling onto neighboring farms. .
Solinftec’s equity investors include TPG’s alternative and renewable technology growth private equity platform, TPG Art; AgFunder Inc. and Unbox Capital, a private equity firm that invests part of the Trajano family’s fortune.
The rating agencies were sold to around 35 investors, including hedge funds, family offices, credit funds and high net worth clients of private banking units of Itau Unibanco Holding SA, of the Brazilian unit of Credit Suisse. Group AG and Banco BTG Pactual, said Ferraz. Rating agencies are tax exempt for individuals in Brazil, and Solinftec’s are offering attractive returns, he said.
About 90% of the notes mature in four years, with a one-year grace period, and the remainder is due in six years with a three-year grace period. Longer-term ARCs have returns that vary with income performance. The company generates R $ 120 million in recurring annual revenue and around R $ 45 million from customer contracts have been used as collateral.
“Many of the clients who use our services are huge Brazilian companies with the best possible credit rating, and our contracts with them last up to eight years, so we have higher quality debt to offer as collateral,” said Braido.
Planeta Securitizadora Agro, a unit of Gaia Securitizadora SA, managed the operation. The ESG certification came from the Climate Bonds Initiative, while Sitawi Financas do Bem issued a second opinion.
In five years, Solinftec has helped its customers avoid the emissions of more than 680,000 tonnes of carbon dioxide, based solely on reducing the use of diesel by agricultural machinery, according to Guilherme Guine, director of product development at Solinftec. That’s the equivalent of planting over 30 million trees or using 700,000 electric cars, he said.
“Solinftec enables its customers to reduce costs and at the same time improve ESG standards; you don’t have to spend money on carbon credits, ”Guine said. “The company was born in the heart of the Brazilian agricultural world, not in Silicon Valley.”
The company, created in 2007 by seven Cubans, began by providing technological support to the sugar cane giant Cosan SA before offering its services to other clients. After using Solinftec technology, Cosan was able to reduce the number of harvesting machines it uses from 250 to 220.
Solinftec oversees around 80% of Brazil’s sugarcane harvest and is expanding into the soybean market, serving nine of the country’s 10 largest producers. Globally, it oversees 22 million acres (8.9 million hectares) of crops, including corn, cotton, coffee, oranges and eucalyptus.
In June 2019, the Aracatuba, Sao Paulo-based company moved to the United States, at the Purdue Research Park in West Lafayette, Indiana. He also has an office in Cali, Colombia. Solinftec has around 600 employees and serves customers in 14 countries.
Turnover increased by 60% in 2020, with more than 100 million reais in annual recurring contracts with an average maturity of five years. He raised 80 million reais in a CRA sale in January 2020.
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