Presentation to Vermont Pension Investment Committee
Case Study: Agricultural Production Loan Facility
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Transaction Overview
$450 million debt investment backed by
a portfolio of 800+ insured agricultural
production loans
Conservative maximum facility advance
rate of 87.5% against the unpaid
principal balance of eligible facility
collateral (equal to approximately 79% on
the insured value of the crop)
Structure provided breakeven loss
coverage (to 0% IRR) of 3.2x the base case
cumulative net loss expectation, providing
what we believe to be ample cushion for
volatility in loss rates in a wind-down
scenario
All data as of December 2019 unless otherwise noted. The case study shown illustrates
the most recent agricultural production loan facility originated since inception as of
May 2021. This case study is shown for illustrative purposes only and there is no
guarantee that Ares will have similar investment opportunities in the future. The
underwritten IRR and MOIC targets do not reflect actual returns to any investor. This
information is neither an offer to sell, nor the solicitation of an offer purchase, any
security, the offer and/or sale of which can only be made by definitive offering
documentation. References to "downside protection", "sufficient diversity" or similar
language are not guarantees against loss of investment capital or value, nor does it
assure profit. Please review in conjunction with the Case Study Endnotes on slide 35.
Confidential - Not for Publication or Distribution
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Background
Specialty finance company (the "Company") provides services to U.S.
farmers through an integrated offering of crop production lending
and insurance brokerage services
The Company was unable to: (i) access capital in scale due to the
complexity of the underlying asset and (ii) access traditional
corporate debt due to size and growth stage
The Company's existing financing became increasingly inflexible and
difficult to manage given the burdensome reporting requirements of
a multi-bank syndicate and inability for the banks to continue to
scale with the Company's growth
Ares structured a bespoke financing solution that is customized to
the cashflow profile of the assets
Structure
$450mm three year revolving credit facility
Facility backed by agricultural production loans secured by (i) a
perfected first priority lien on growing crop and (ii) an assignment of the
associated federally backed crop insurance
Economics:
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Loan pricing of L +3.75%, subject to a 1.00% floor; Ares' position
expected to receive a 2.35% upfront fee and pro rata pass through
of the facility's 0.375% unused fee and the expectation of
repayment and exit at the end of the revolving period
Underwritten to a gross IRR of 12% and a gross MOIC of 1.2x (as
of the closing date)
ØARES
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