PensionDenmark announced that it will commit its support to the DKK 2 billion, (€269 million, US$293 million) Danish Agriculture Capital fund being launched by the country’s Ministry of Business and Growth with the goal of providing debt financing to Denmark’s farmers.
The new fund, which will be run by the Danish Growth Fund will receive DKK500 million (US$73 million) from the Danish government, and plans to raise a minimum of another DKK 500 million (US$73 million) from pension funds and outside investors.
After extensive negotiations between the Ministry of Business and Growth, The Danish Growth Fund and multiple Danish pension funds about the structure of Danish Agriculture Capital, it appears that a settlement has been reached moving forward.
“It now looks as if a model has been found in which PensionDanmark and other investors can put capital into the new fund, thereby making a reasonable return while at the same time helping supply financing for skilled farmers keen to invest in their businesses,” said Torben Möger Pedersen, chief executive of PensionDenmark.
The fund is designed to finance agricultural businesses that have the potential to remain profitable but that are carrying high levels of debt through the offering of subordinated loans that are not able to be called by Danish Agricultural Capital.
“Several hundred businesses are assessed as being effective enough to be able to remain profitable by investing more in their production combined with a long-term solution for their overall debt,” said Möger Pedersen.
At this point there is no set size or term limit set for any loans made through the fund, however expectations are that typical loans will range in size from DKK 5 million (US$730,000) to DKK 10 million (US$1.46 million) with a general term of eight years at a fixed rate, with 150-200 leans granted to farms in the coming years.
“If the negotiations go as we expect, Danish Agricultural Capital will be able to grant its first loan at the start of 2017,” said Troels Lund Poulsen, Denmark’s Minister of Business and Growth.
Recent Mover
Denmark has been gearing up its investment activity in the agricultural space in recent months. At the beginning of August it was announced that the Danish government, the Investment Fund for Developing Countries (IFU), PensionDenmark, and PKA partnered on a commitment of DKK 700 million (US$102 million) to the newly launched Danish Agribusiness Fund (DAF).
The first closing on the fund raised DKK 212 million (US$31 million) from IFU, DKK 200 million (US$29 million) from each of PensionDenmark and PKA, and DKK 88 million (US$13 million) from development aid. A second closing is expected to bring in another DKK 100 million (US$14.6 million).
IFU will manage the fund, which will invest in projects along the entire agricultural value chain in Africa, Asia, Latin America and regions of Europe where there is a Danish commercial interest.
“We are very pleased that we have managed to bring private investors and public capital together in a fund that has such an important purpose,” said Tommy Thomsen, CEO of IFU in a statement announcing the fund’s launch. “Because the Danish Agribusiness Fund only contributes with part of the investment in each project, we expect that the total investments will amount to around DKK 6bn.”