Abu Dhabi Equity Partners (ADEP), the Cayman registered Emerging Markets investment house, initiates Brazil's first Sharia-compliant livestock finance programme of USD 25 million
Investment effectively places ADEP amongst largest Cattle aggregators in World's biggest beef exporting nation
ADEP's physical commodity backed financing offers investors short term capital and profit protection from Global financial institutions; significant US Dollar investment yield pick-up; and global beef processing Companies as counterparties, thus providing the Islamic Finance market with genuine alternatives to paper based Murabahas
Abu Dhabi Equity Partners ("ADEP"), the Cayman registered Emerging Markets Sharia-compliant investment house, has this week successfully initiated Brazil's first Sharia-compliant livestock finance programme of USD 25 million, to fund fattening of 70,000 cattle heads - the metric tonne equivalent of entire U.A.E.'s annual import of beef.
ADEP's Managing Partner, Mr. Muneef O. Tarmoom stated that, "Sharia-compliant funding of the growing multi-billion US Dollar Halal food industry is a natural yet untapped market segment for both agri-producers and institutional investors. ADEP's physical asset backed financing with capital and profit rate protection features from Global 'A' rated banks, compelling risk adjusted yields, originated from World's largest Beef exporting nation and food processing companies, does provide the Sharia conscious Gulf investor with a genuine real economy alternative".
ADEP's landmark Brazilian Sharia livestock transaction allows a select group of Brazil's "Top 40" cattle feedlot operators to increase their capacity utilization, in the states of Goias and Sao Paulo (states with land area equivalent to the size of Germany and the UK, respectively). It is common industry practice for cattle financing to typically be in USD 3m-5m range per Rancher depending on physical feedlot pens capacity (equivalent to 8,000 - 14,000 heads).
ADEP financing was structured as a combination of Wakala (agency) and Murabaha agreements enabling investors to buy and take title from Rancher, of liquidly traded Cattle (the most liquid agricultural commodity in BMF Bovespa, Brazil's largest exchange), insured and stored physically in separate feedlots inspected and supervised by a global monitoring company; and appointing ADEP (as agent) and Rancher (as sub-agent) to sell Cattle at principal plus agreed profit rate primarily to Brazil's key Global beef processing companies on payment against delivery basis.
ADEP's network of advisors in this transaction included White & Case (global and Sharia counsel), Macquarie Bank (price protection), Khalij Islamic (Sharia consultant), Peterson Control Union Group (monitoring and inspection), and SwissRe. (insurance).
Muneef Tarmoom added, "amongst the industry firsts in this transaction is giving investors the opportunity to access Sharia-compliant real asset investing, in the world's seventh largest economy that ranks #1 in terms of beef exporting volumes, with capital and profit protection from 'A' rated Global investment bank and a yield pick-up, as an alternative to paper based London Metal Exchange commodity murabaha commonly offered by many Islamic banks, that are frowned upon by most Sharia scholars and have no material impact to the real economy. Another first, is using latest information technology to allow investors to view online "live 24/7" their purchased cattle in federally regulated feedlots, all with the objective of increased peace of mind and operational transparency".
Mr. Juan Fernando Valdivieso (Managing Partner, ADEP) stated, "originating, structuring and placing Sharia-compliant products is not easy, and to adapt them to Brazil was very challenging; it took persistent effort from our Abu Dhabi and Miami offices and origination team on the ground in Brazil to coordinate and execute transactions with Beef processing companies, prospective Ranchers, as well as our network of advisors. Structuring partnerships with top feedlot owners in Brazil and securing cattle sales with some of the world's largest beef processors has proven to be a win-win-win for all parties. Feedlot owners get convenient financing to increase their feedlot utilization and drive lower costs per head, beef processors get large volumes of cattle to slaughter in the dry months to improve their capacity utilization and ADEP's investors get pure Shariah-compliant investments with an attractive yield pick-up for their capital and profit rate protected investments.
Juan Fernando Valdivieso added, "the hard work in originating attractive deals in Brazil is now beginning to pay ample dividends with deals being closed, and over USD 100 million worth of identified physical cattle and sugarcane based transactions in pipeline for 2014. ADEP's strength has been in combining emerging markets, agri-business, Islamic finance and business management discipline to arrive at new investment solutions".
Muneef Tarmoom added, "Following extensive proprietary market research, ADEP's introduction of "Halal" cattle financing products was a natural progression for the Islamic finance industry, merging Halal meat production with Halal funding - thus giving Sharia investors and consumers a purer alternative which better meets their needs."
Muneef Tarmoom further added, "Sadly, the current mode operandi in the beef industry is mixing conventional funding, with pork & Halal beef production; with Scholars' encouragement, ADEP was inspired to arrive at more wholesome solutions".
Prominent Shariah scholar and professor of law Dr Hussain Hamid Hassan commented, "We congratulate ADEP for bringing a unique short term investment opportunity to the Islamic investors, which not only provides competitive returns but also adds value in the real economy while supporting the Halal meat industry". Similarly, Dr. Aznan Hasan, President, Association of Shariah Advisors in Islamic Finance (ASAS) stated, "ADEP's Livestock backed financing demonstrates that it is indeed possible for the Islamic finance industry to develop commodity-based products that are competitive in major international markets, whilst at same time have real economy activities. This physical commodity backed offering is indeed a better alternative to the practice of commodity murabahas, and we encourage and look forward to more such products".
Muneef Tarmoom added, "According to World Trade Organization, between 1990 and 2012, the Mid-East agriculture trade deficit has increased exponentially from USD -6bn to -79bn, whilst in the same period, the Brazilian agriculture trade surplus has grown in almost the exact opposite direction from USD +7bn to +73bn. With continued Mid-East population growth, declining water levels, further urbanization and changing diets, it is expected the Mid-East agricultural trade deficit will continue to deteriorate in the next twenty years. On the other hand, surplus agri-trade balance in Brazil is expected to grow with world demand given (according to FAO) highest excess farmland, renewable water resources and good weather conditions. Therefore, it would appear logical that with Muslim population of over 90%, and pools of excess liquidity, strategically positioned Islamic financial institutions in the Mid-East and beyond stand to gain substantially from such "South-South" trade corridor in the next two decades. ADEP aspires to be a player along such a reliable and tested strategic food security axis".
-Ends-
1. Background:
Abu Dhabi Equity Partners (ADEP), is a Cayman registered Emerging Markets Sharia-compliant liquidity management instrument specialist investment house, with presence in Abu Dhabi, Miami, London and Sao Paulo www.ad-ep.com
2. ADEP's mission is twofold, namely;§ Act as a bridge for capital flows from the Capital rich / Resource short Gulf state countries to Resource rich/Capital short emerging markets, with a focus on Brazil - leveraging on Energy for Food ("E4F") initiatives along growing South-South trade corridor.
§ Structure and bring socially responsible, competitive, Sharia-compliant funds to Latin America;
starting with the asset based agricultural sector [inventory → production → infrastructure]
Abu Dhabi Equity Partners develops Islamic, Shariah-compliant financing instruments to finance working capital and operations of select commodity growers/producers in emerging markets.
Abu Dhabi Equity Partners has a strong network of agribusiness companies throughout South America, as well as a network of global institutional investors and large family offices.
ADEP's founding team is a highly experienced one, having served at CEO and Partner levels in some of the world's foremost Sovereign Wealth Funds and consulting firms. It has raised over $200 million dollars in last 5 yrs for companies they founded, where they identified the opportunities, raised the capital, operated the companies and sold them. They are supported by a strong supervisory Board, with distinguished executives from the banking (conventional and Islamic), investment management and agribusiness sector, and a Sharia Board composed of globally renowned Islamic scholars.
Muneef O. Tarmoom is founder and managing partner of ADEP. Muneef is a senior financial and management consulting advisor to Governments and leading corporations. Muneef was formerly CEO of a global Sovereign Wealth Fund, with assets in excess of US$ 4 billion, focused on global private equity and alternative investments. Prior to that, Muneef was a senior executive at the Abu Dhabi Investment Authority (ADIA) heading ADIA's European Asset Management team, one of the largest in the world; he also was a member of ADIA's global asset allocation and private equity working committees. Previously, Muneef consulted at a UK Oil major. Muneef holds an MBA in Finance from University of Strathclyde (UK), as well as a BA in Business Studies with Honors, obtaining "First Class" degree from University of Middlesex (UK). Muneef is a Qualified Professional Member of IIMR (Institute of Investment Management and Research, London). Muneef has held Board positions in various global funds and corporations.
Juan Fernando Valdivieso is founder and managing partner of ADEP. Juan Fernando is an experienced executive who has launched various private equity, consulting and real estate entities. He was also founder and Partner of Park Street Advisors, a boutique strategy consulting and private equity firm. Juan Fernando began his career as a Junior Partner of McKinsey & Company. He worked in 14 different offices in 9 countries, primarily in projects in financial services, telecom and petroleum, with a special focus on strategy, business building and post-merger management. Juan Fernando holds a Masters of Business Administration from MIT Sloan School of Management. He also holds Bachelor of Arts degrees from Lafayette College, summa cum lauda, in Economics, Business and International Affairs. Juan Fernando was also awarded the Wall Street Journal Achievement Award in Economics, as one of the top Economics undergraduates in the United States. He holds Board positions in various funds and corporations. 5.
5. Contact details
Americas
Europe, MidEast/Africa, Asia
ci@ad-ep.com
ad@ad-ep.com
© Press Release 2014
