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WASHINGTON, D.C., Jan. 22--The International Finance Corporation (IFC) signed an agreement for US$200 million in loans with Sadia Concórdia S.A. Indústria e Comércio of Brazil on December 30, 1996, to help finance Sadia's five year expansion and modernization program.
The US$505 million investment program is designed to increase production capacity across most of Sadia poultry, pork and beef production lines with special emphasis on higher-value processed products. Domestic demand for these products and animal protein in general increased dramatically since the advent of the Real Plan as a result of stable prices and growth of real disposable income. The investment program will create an additional 5,000 direct and indirect jobs where Sadia's plants are located and where another 675 poultry and pork farmers will be integrated into the company's outgrower network. It also includes additional financing of US$7 million to attain full compliance with World Bank environmental, health and safety standards by July 1998.
This is the first time that IFC has used single-asset securitization in Brazil, an instrument that brings new sources of long-term investment capital -- in this case US insurance companies -- to emerging market companies. It is also the first time an IFC co-financing arrangement for a single company in Brazil has received an investment grade rating from major credit rating agencies.
"Because of its leadership position in the Brazilian food industry and yearly requirements of large capital investments, Sadia is a natural candidate for tapping US institutional investors through this relatively new IFC instrument - the single-asset securitization. IFC's role was instrumental to the structuring of this transaction to clear the sovereign risk ceiling and introduce a wider group of investors to long-term lending in Brazil," said Karl Voltaire of IFC's Agribusiness Department. "I would expect that this instrument would be utilized more and more in Brazil particularly for infrastructure projects that require large investments and longer maturities."
This funding package has raised US$165 million with a 12-year maturity through a securitization of a B loan made to Sadia. 100% participation in that B loan was sold to a special purpose trust which financed its purchase through the issue of trust certificates to US insurance companies. These trust certificates have been rated by Standard and Poor's and Duff and Phelps at BBB- . ING Baring (U.S.) Securities Inc. and SBC Warburg Inc. acted as placement agents for the trust certificates. IFC has purchased for its own account US$5 million in trust certificates and funded an additional US$35 million in loans with the same maturity.
Sadia is one of the oldest Brazilian integrated food companies with 1995 net sales of US$2.5 billion. It employs over 25,000 people and relies on more than 15,000 farmers that provide it with livestock, its main raw material. It has been a pioneer in introducing new and varied food products to the Brazilian diet as well as an innovator in establishing modern food production and marketing systems in Brazil.
IFC is a member of the World Bank Group and is the largest multilateral source of equity and loan financing for private sector projects in developing countries.
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