- April 12, 2004
- Posted by: admin
- Category: Historic Investments
Empowerment financial services company Mettle has structured a R52 million finance facility for a project developed by logistics company Navitrade, a member of the Grindrod Limited Group. The funds are being used to finance a rail tippler facility currently operating in Richards Bay, for use by Foskor, a wholly owned subsidiary of the Industrial Development Corporation (IDC), under an outsourcing agreement with Navitrade.
Foskor focuses on the beneficiation of phosphate rock for the manufacture of phosphoric acid and phosphate based fertilisers for both the local and international markets. The tippler has capacity to handle in excess of three million tons of product per annum.
According to David Hurwitz, head of Mettle’s debt division, the deal is unique in that it employs institutional as opposed to bank funding. The terms of the deal are also flexible in that Navitrade may draw down the cash as and when they require it.
Navitrade is 75held by JSE-listed Grindrod, and 25 by empowerment company Worldwide African Logistics Trading, a member of the Worldwide Africa group.
Companies requiring funding for such projects typically approach the big banks. Using innovative structuring technology, Mettle repackaged the debt for the institutional market instead. “We used credit enhancing as well as securitisation techniques to effectively take out operating risk,” says Philip Froom, who together with Hurwitz was responsible for structuring the transaction. “In other words, we took project debt and converted it into secured cashflow-backed funding.”
Specialist asset manager Futuregrowth agreed to participate in the transaction, given the involvement of both Grindrod and its empowerment partners, as well as major corporate, Foskor. Says Marshall Brown of Futuregrowth, “Because our expertise lies in funding innovative transactions, we have a long standing association with Mettle, which specialises in structuring such transactions. Further, we felt this was an attractive investment opportunity for our clients, and were particularly pleased to participate in the creation of additional handling capacity at the port of Richard’s Bay. It is also important to us to support companies with empowerment credentials, like Navitrade and Mettle.”
JSE-listed Grindrod is focused on providing total logistics solutions for its clients. It enters into joint ventures and strategic alliances where this is optimal for all parties. Grindrod’s operations embrace ship owning and operating, ships agencies, logistics management, international forwarding and customs clearing, warehousing and distribution and insurance and financial services.
Says Grindrod Managing Director, Ivan Clark, “Top class handling and storage facilities such as those of Navitrade and its sister company, Kusasa, can require significant capital expenditure. These projects have seen some R200m of new infrastructure in Richards Bay in the last few years, so we are very pleased to have accessed an innovative source of funds through Mettle and Futuregrowth. We see further scope for such transactions”.
In conclusion, Hurwitz says that this type of transaction is a niche industry that Mettle is developing; one that he sees substantial potential for in the South African business environment where banks have become increasingly cautious about financing projects, opening the way for non-traditional companies like Mettle to find innovative funding solutions.