PensionDanmark has voiced its support for an investment fund being launched by Denmark’s Ministry of Business and Growth to raise DKK2bn (€269m) of equity and debt financing for Danish farms.
Torben Möger Pedersen, chief executive of the DKK189bn labour-market pension fund, said: “There has been a constructive dialogue for some time between the Ministry of Business and Growth, the Danish Growth Fund and several Danish pension funds about setting up Danish Agricultural Capital (Dansk Landbrugskapital).”
The Danish Growth Fund (Vækstfonden) is a state investment fund set up in 1992 that invests equity and provides loans and guarantees for small and medium-sized enterprises in conjunction with private partners and Danish financial institutions.
“It now looks as if a model has been found in which PensionDanmark and other investors can put capital into the new fund, thereby making a reasonable return while at the same time helping supply financing for skilled farmers keen to invest in their businesses,” Möger Pedersen said.
He said this would result in growth and employment particularly in those parts of Denmark where they were most needed.
Troels Lund Poulsen, Denmark’s minister for business and growth, said there were many farmers with effective businesses that they were ready to invest in, but who were hindered by high levels of debt.
“Several hundred businesses are assessed as being effective enough to be able to remain profitable by investing more in their production combined with a long-term solution for their overall debt,” he said, adding that these were exactly the farmers the fund was targeting.
Danish Agricultural Capital would receive a DKK500m transfer from the state.
The ministry said the goal was to attract at least a further DKK500m from pension funds and possibly other investors to reach the initial goal of raising DKK1bn.
It said the Danish Growth Fund would run the new farms fund, and that it was working right now on making deals with a range of larger pension funds to invest in it.
“If the negotiations go as we expect,” Lund Poulsen said, “Danish Agricultural Capital will be able to grant its first loan at the start of 2017.”
The new farm financing fund would offer subordinated loans that are non-callable by Danish Agricultural Capital.
The ministry said there were no fixed sizes or terms for the loans and that they were expected to be for DKK5m to DKK10m, with terms of up to eight years at an individually fixed rate of interest.
Loans are expected to be given to 150-200 farms over the next few years.