July 14, 2022

By Lynda Kiernan-Stone, Global AgInvesting Media

Backed by long-term institutional capital, New York-based asset manager AMERRA Capital Management has invested more than $5.7 billion since its inception in 2009, and currently has more than US$1.4 billion in AUM concentrated in upstream and midstream food and agri businesses in Europe and the Americas. 

It was in 2018 when AMERRA was introduced to Paulo Santos, a successful entrepreneur and head of Brazilian ethanol distribution business FL Participações. At the time, Santos was focusing on a small, profitable ethanol distillery for sale in the state of Bahia.

Already familiar with the business landscape in the region, Santos saw the potential for multiple, immediate, impactful capex projects, and began seeking out a financial partner that could not only provide needed capital, but also would impart insight in regard to governance and operational best practices that would maximize production and therefore, yields.

Brazil is a pioneering country in the use of ethanol fuel. It is the second largest fuel ethanol producer in the world, following the U.S., but the single largest sugarcane ethanol producer. In 2021, Brazil accounted for 7.5 billion gallons of production, representing a 27 percent share in total global output. Thanks to this industry, Brazil has made headway in gaining energy independence, replacing 47 percent of its gasoline demand with sugarcane ethanol in 2019.

After due diligence was rapidly satisfied by mid-2018, AMERRA agreed with Santos to commit $25 million in debt financing, including an EBITDA-kicker, in exchange for a significant minority stake in the business.

This deal falls exactly within the parameters of AMERRA’s private debt transactions which typically range from $15-$50 million in the form of senior secured to junior debt, pre-export/pre-crop financing, acquisition and capex programs, and project financing.

In only three years, the 1 million ton crush capacity mill increased production from 630,000 tons in 2018 to 935,000 tons in 2021, at which time the original loan was fully repaid. During this term, in 2019, AMERRA agreed to structure a separate $17 million loan to finance the company’s varying capex projects, which today remains set to be fully repaid according to its original terms. 

The success of this business is largely due to the way that AMERRA brings value to its portfolio companies through its concentrated focus on the food and agri-business value chain matrix spanning inputs, crop production, protein production, processing, and trading and logistics, its extensive network, and in-depth expertise and knowledge.

AMERRA also brings to bear its ESG Policy – a set of principles, procedures, and objectives that speak to environmentally and socially responsible investing across its dedicated investment strategies, and its participation in the UN Environment Program – Finance Initiative.

“Without AMERRA, FL Participações would not be in the position to acquire 100 percent of the equity in Bahia Ethanol,” said Santos. “Not only did AMERRA implement an efficient governance structure but their deep understanding of the Brazilian market allowed the company to successfully navigate the acquisition process, COVID-related personnel matters, supply chain disruptions and a host of other challenges.”

As the capex and operational projects gained traction, the company’s EBITDA doubled between 2018/19 – 2021/22, creating a window of opportunity for Santos to approach AMERRA with the intention of purchasing their equity stake in the business. In early 2022, the two partners quickly agreed to terms, giving AMERRA a successful exit.

The results speak for themselves,” noted Santos. “…as operational improvements led to financial performance that exceeded all expectations. I look forward to working with the AMERRA team again.”

~ Lynda Kiernan-Stone is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

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