October 7, 2024

By Gerelyn Terzo, Global AgInvesting Media

In a show of strength for Canada’s private sector financing, Glengarry Farm Finance, an alternative lender to the ag industry owned by merchant bank Stormont Partners, has struck a key partnership. Farm Credit Canada (FCC), which is 100 percent invested in Canadian ag and food, has committed C$60 million to Glengarry Farm via Stormont’s C$100 million open-ended debt fund. Stormont’s fund invests across first mortgages and Canadian farmland in commercial production. On a pro-forma basis, the debt fund currently exceeds C$100 million.

With the proceeds of the investment, Glengarry can provide Canadian farmers in crisis, among others, a more accessible form of financing when they need it the most. Given the tight nature of the lending markets of late, the FCC’s investment couldn’t have come at a more poignant time.

As a Crown corporation, FCC is a government arm and is considered the biggest lender to Canada’s ag industry. Since Justine Hendricks took the helm in early 2023, the organization expanded its mandate and broadened the way it invests. In a paradigm shift, the FCC — historically known as a lender — began to take capital off its balance sheet to invest in agtech and food-tech funds run by third parties. However, it never invested in another lender — until now. Securing this partnership was a feather in the caps of both Glengarry and Stormont, allowing them to become 2x-3x more active then they have been so far.

Stormont Partners Founder and Managing Partner Greg Kalil told GAI News, “It’s huge, a phenomenal endorsement of what we’re doing. Not only are they providing the necessary funding, but they’re helping us to grow. FCC recognizes we can do things they and the banks can’t do. They are trying to bring more stability into the private debt markets by investing in a company like ours to help us develop into a sustainable part of the financial ecosystem around agriculture.”

The capital injection is expected to significantly bolster Glengarry Farm’s capacity to support growers in Western Canada and Ontario, a market that it describes as underserved. In fact, a mere 10 percent of Canada’s farm credit originates from the private sector, as banks dominate lending in the space. Financial institutions manage this responsibility in a conservative way, owing to headline risk. Meanwhile, Canada’s private debt markets are a bit disjointed, and Glengarry is one of only a handful of firms bringing an institutional approach to ag lending.

Kalil explained, “Our model is flexible. We can move very, very quickly and effectively and lend to equity in the land. Banks, on the other hand, lend to cash flow. We’re less worried about that measure in the short term, as we recognize that it’s usually weak cash flow that our borrower needs time to recover from. Our job as a transitional lender is to give the farmers time to get their operations back in shape by lending them money over one to two years. That’s our business plan, and it allows them to return to bank financing, which is much more sustainable.”

Farmers generally tap Canada’s private capital markets when they need access to temporary financing in response to one-off financial setbacks, such as a weather event, disease in the herd, etc. That’s exactly who Glengarry Farm had in mind when they built their business through a lens of a transition lender three years ago.

“There are decades worth of evidence that farmland is a very, very stable investment on the downside and a great inflationary hedge on the upside,” noted Kalil.

With approximately 62.2 million hectares (153.7 million acres) of farmland, Canada’s farmers are currently having a banner year, owing largely to a combination of elevated commodity prices and bumper crop yields. However, with the lion’s share of Canada’s farms family-owned, demand for financing remains robust amid a need to finance activities such as expansions, debt consolidation, working capital or as a bridge to other events like a land sale or harvest, for example.

“Demand from the farmers is definitely there. We’re barely scratching the surface of the market opportunity right now,” Kalil said, adding that Stormont expects to ultimately raise hundreds of millions of dollars for the fund amid a multi-billion-dollar opportunity.

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