Olam buys Danish equipment with long-term loan

With a buyer credit guarantee from EKF, global food group Olam secured long-term financing to purchase equipment from Danish GEA Process Engineering. The equipment was installed in connection with the establishment of a manufacturing facility in Vietnam.

Case facts

What: Gea Process Engineering A/S produces equipment for manufacturing spray-dried instant coffee
How much: USD 32 million
EKF's role: EKF secured a long-term loan for the customer in Vietnam

When: 2009

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The challenge

This transaction was a milestone for us because it meant that in spite of the financial crisis we were able to secure long-term financing for our activities on a growth market.
Arun Sharma, Senior Vice President, Coffee Division, Olam

In 2009, Olam International was looking to invest in equipment for a new manufacturing facility in Vietnam. Olam's choice had settled on GEA Process Engineering A/S in Søborg, Denmark as the supplier of a plant for manufacturing spray-dried and freeze-dried instant coffee.

However, the financial crisis made it difficult for Olam to secure the financing it needed to buy the equipment.
“Owing to the lack of liquidity in the financial market in February 2009 it would in all probability have been impossible to secure financing with a repayment term beyond 2-3 years for Olam,” says Antero Ranta from Olam’s bank, ANZ Structured Asset and Export Finance, in Singapore.

GEA Process Engineering specialises in the development, design and manufacture of equipment for industrial drying and was keen to land the order from Olam, which is a global leader in agricultural products and food ingredients with activities in a number of countries.
The process

GEA knew EKF from many years of cooperation on exports and proposed that EKF be involved in the process of procuring financing for the project in Vietnam.

“I was convinced that EKF would be able to assist in putting the financing in place. For our part, it was all plain sailing, as, right from the start, our customer and ANZ were keen to take over and deal with EKF directly,” says Jesper Duckert, Project Finance Manager, GEA Process Engineering A/S.

As part of the financing negotiations, EKF attended a meeting in Vietnam with representatives from Olam and ANZ Structured Asset. The visit to Vietnam gave EKF a better basis for assessing the actual credit risk entailed by the project.
The solution

Following a detailed assessment of the project, EKF was able to offer a buyer credit guarantee. This meant that EKF assumed a share of the risk of extending a loan to Olam, and with that the financing fell into place.

“With an export credit guarantee from EKF we were able to offer Olam a loan with a repayment term of 8.5 years,” says Antero Ranta from ANZ Structured Asset and Export Finance in Singapore.

The solution to the financing was seen as nothing short of a milestone.

“In spite of the financial crisis we were able to secure long-term financing for our activities on a growth market,” says Arun Sharma, Senior Vice President, Coffee Division, Olam.