Tropical Landscapes Finance Facility

Owned by Ashu Sikri (Unlicensed)
Jul 27, 2022
2 min read

See detailed case study here

Some highlights

  • Blended finance structure that brought in institutional capital to a $95mn facility whose proceeds were used by RLU (a JV between Michel and PT Barito Pacific) to “plant rubber trees across degraded concession areas in the Jambi and East Kalimantan provinces”

  • The goal here was to create tranches of debt that appealed to investors with different return expectations and thereby crowd in commercial capital.

    • $30mn in Class A notes (15 year maturity, 4% annual coupon) which got a AAA investment grade rating from Moodys and so could be purchased by institutional investors (in this case, life insurance companies). Purchasers of these notes got a high ESG investment without having to take on additional financial risk (or reduced rate of return. Note-holders for this tranche are fully covered by USAID Development Credit Authority guarantee.

    • $40mn in Class B1 notes (5 to 15 year maturity and ~9% annual coupon). These investors are not covered by the guarantee. They are described as “investors with explicit impact mandates that had the capacity to take on greater risk, across varying tenors and return expectations”

    • $15mn in Class B2 notes (15 year maturity, 2% annual coupon): Not sure who purchased these notes, would be interesting to find out as they are the ones (along with the loan guarantee) making it happen! Maybe its local govt, DFIs or ADM Capital who was the arranger?

  • One unique feature here is that Michelin committed to purchase upto 75% of the future rubber production of the plantation

  • Vigeo Eiris, a global sustainability consultant and approved verifier for the Climate Bond Initiative, reviewed the project and deemed the notes Sustainability Notes, aligned with the International Capital Market Association (ICMA) Sustainability Bond Guidelines. [Not sure if this was important to the investors but interesting to note]