Irish Dairy Board hopes to break into new markets after €350m loan
THE Irish Dairy Board (IDB), the company behind Kerrygold butter and Dubliner cheese, has raised €350m in loans from international banks to expand into emerging markets.
The new deal includes an innovative structure that allows suppliers to access parts of the loan to help drive their individual efforts to boost exports.
IDB has raised the cash with its eye to expanding its sale of Irish dairy into new markets including Russia, China and South East Asia.
It wants to boost sales of its consumer dairy and food ingredients with the new export drive.
IDB is owned by a group of 10 dairy co-ops including Dairygold and Glanbia. The owners are also its main suppliers.
The business has a turnover of €1.9bn from global sales of Irish dairy products. Sales in 2011 are understood to have grown by as much as 19pc thanks to a combination of rising food prices and increased demand from abroad.
Yesterday IDB said it has raised the €350m from a syndicate of six banks. The loans are due to be repaid in December 2014.
The deal refinanced an existing €250m loan and raised an additional €100m in fresh money. It was led by Dutch bank Rabobank, an agrifoods specialist.
The full syndicate also includes: Allied Irish Banks, Bank of America Merrill Lynch, Barclays, HSBC and Ulster Bank. IBI Corporate Finance advised on the deal.
The loan facility includes a €160m loan that can be used to fund IDB's current needs and to invest in developing its international growth strategy.
The new loan includes an innovative €190m Reverse Invoice Discounting facility, the first of its kind anywhere.
In a nutshell this facility will allow co-ops which supply dairy products to IDB to be paid in advance for the value of invoiced sales through short-term bank loans arranged under the facility.
This kind of financing can be crucial because it makes it easier for exporters to manage their working capital, even if their revenue streams mean payments come in irregularly.
The IDB says the launch of the new-style loans comes in time to allow the company and its suppliers to develop a funding solution it hopes to be able to scale up after 2015, when the milk quota system is due to be scrapped.
IDB is owned by Arrabawn, Carbery, Town of Monaghan, Connaught Gold, Dairygold, Glanbia, Lakeland, North Cork, Tipperary and Wexford co-ops.
IDB's focus on sales abroad means it has its own in-house finance team looking at foreign exchange issues.
Their key focus is in the euro-sterling and euro-dollar exchange rates, but keeping an eye on the relative strength of New Zealand's dollar in the markets is an important way to measure the competitiveness of Ireland's food exports.