OREANDA-NEWS. November 14, 2008. The EBRD is providing a loan of up to USD 30 million to Desnagrain, a Ukrainian agribusiness company, in a move that will support the local farming sector, reported the press-centre of EBRD.

The proceeds of the credit to Desnagrain, a wholly owned subsidiary of French agricultural cooperative Champagne Cereales, will be used to finance its provision to farms of essential farming inputs such as seeds and fertilizers and to buy malting barley, other grains and oilseeds from the same farmers at harvest. The project will help to continue the development and introduction of new farming technologies. Agriculture is a key strategic sector for the country and the project will contribute to realise the potential that Ukraine can build upon.

This credit is provided in conjunction with a loan of the same amount granted by Calyon, a subsidiary of the Credit Agricole Group, guaranteed by Credit Agricole Nord-Est, a long-standing partner of the Champagne Cereales Group.

The credit may be disbursed either in dollars or in hryvnias, providing an opportunity of taking up finance in the local currency and avoiding currency risks. Desnagrain was established in 2006 as a spin-off from a leading European malt producer Malteurop, another subsidiary of Champagne Cereales.

In addition to linking substantial cash resources generated from the brewing sector with the Ukrainian farming industry, this project will also support the use of the warehouse-receipt system (WHR) as collateral for the debt. Warehouse receipts provide farmers and traders with access to finance, providing a reliable means of producing, storing and exporting grain at competitive prices. The Bank has been actively supporting WHR as a means of finance across its countries of operations.

According to the CFO of Champagne Cereales, Paul Roux: “Desnagrain works closely with farmers, currently around four hundred, to improve the quality and yield of their crops through technical and financial assistance and training”. “This will provide increased cash flows to continue the much needed restructuring of the Ukrainian primary agricultural sector and contribute to the much needed development of food production across the region”, he added.

Gilles Mettetal, Director Agribusiness at the EBRD says: “This transaction conforms with the Bank’s strategy for Ukraine and to its Agribusiness strategy, which is aimed at the modernisation of the Ukrainian agricultural sector.” “The proposed financing structure allows the Bank to provide primary agriculture financing while building on good cooperation and a risk share arrangement with Champagne Cereales’ house banks Credit-Agricole Nord-Est and Calyon. The project shows the Bank’s ongoing commitment with projects in Ukraine despite the difficult current financial environment”.

The European Bank for Reconstruction and Development is the biggest financial investor in Ukraine. As of September 2008, it had committed over EUR3.74 billion through 172 projects. In the agribusiness sector, the EBRD has directly committed more than EUR4.6 billion in over 320 projects across Central and Eastern Europe and the Commonwealth of Independent States.