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NHG advised Las Hormigas Valle Real for USD$44 Million Dollars granted
NHG advised Las Hormigas Valle Real (“Hormigas”), promoted company to the CKD managed by Grupo Renovables Agrícolas (“GRA”), Mexican subsidiary to Renewable Resources Group, LLC (“RRG”) as borrower, in its first structured loan for a total amount of USD$44 Million Dollars granted by Metropolitan Tower Life Insurance Company, represented by MetLife Investment Management, LLC, who was also the administrative and security agent of the loan.
The involvement of Hormigas as institutional borrower added complexity in the negotiations and the terms of the transaction documents, which had to cover internal policies and investment standards for all borrower, lender and security agent, which is not common in this sector.
The loan agreement is governed by the laws of NY and is secured with a Security Trust Agreement (“Security Trust”) and a Non-Possessory Pledge (“Pledge”) over all movable assets, land permits and operational licenses. A Collateral Assignment Agreement and a Completion Support Agreement (“CSA”) governed by the laws of NY were also executed to secure the loan by RRG as parent company to Hormigas.
This complex cross border structured financing involved two institutional parties, while in the agribusiness industry, the borrowers are rarely institutional entities. The Institutionalization of Hormigas meant a high level of specialization, required delicate negotiations in the terms and conditions of the transaction documents and a deep analysis and understanding of real estate financing and the agribusiness industry, particularly the regulatory provisions regarding the plantation and harvest of agricultural lands, the creation of securities over agricultural lands, water and land permits and the assignment of such permits to an authorized trustee.
Agribusiness represents an important industry for RRG in Mexico and the involvement of NHG as counsel to the borrower was crucial in the development of a creative legal and securities scheme, flexible enough so that the borrower can operate its business but with solid guaranties acceptable to the foreign lender and secured parties.
In the financing of agribusiness, borrowers are rarely institutional entities like Hormigas and, in this particular case, the level of institutionalization of Hormigas required a detailed and complex advise by NHG to comply with Hormigas’ investment standards, internal policies and quality standards, in terms acceptable to the institutional lender and agent.
In this case, NHG counseled the borrower in the incorporation of a security trust agreement which allows the borrower to operate its business, even after the payment of the secured obligations, and a pledge over its moveable assets, permits and licenses, which allows it to operate pursuant to Mexican laws and regulations to the satisfaction of the foreign lender and secured parties on the functioning of the Mexican guaranties.
With the participation of:
Las Hormigas Valle Real (“Hormigas”), promoted company to the CKD managed by Grupo Renovables Agrícolas (“GRA”), Mexican subsidiary to Renewable Resources Group, LLC (“RRG”):
Nader Hayaux & Goebel (Mexico) – Partner José Humberto Rocha S., associate José María Castro Farrés and law clerk Yasmin Yektajo.
Proskauer Rose LLP (USA) – Partners Antonio Piccirillo, Fabio de A. Yamada, Associate Andre F. Perdiza.
Metropolitan Tower Life Insurance Company, represented by MetLife Investment Management, LLC, who was also the administrative and security agent of the loan:
Creel, García-Cuéllar, Aiza y Enríquez, S.C (Mexico) – Partner Giovanni Ramírez Garrido and associate Lorena Bustamante Quiroz.
Landay, Leblang, Stern (USA) – Partner Susanna Stern, Of Counsel – Donald Hancock.