Glanbia Co-op launched a new €55m ‘Glanbia Advance Payment’ (GAP) Scheme this week to provide interest free cashflow support to members.
The details of the scheme are Participation in this voluntary scheme will allow members to draw down cashflow support from the Glanbia Advance Payment (GAP) Scheme when the market prices for milk and grain fall below specific levels or ‘price triggers’ set annually by the Board of the Co-op.
The interest-free repayments to the GAP Scheme will be triggered when markets recover above specific levels.
Henry Corbally, Chairman of Glanbia Co-operative Society, said one of the core principles of Glanbia Co-op is to support its active members.
“The aim of the GAP Scheme is to deliver interest free cashflow support to members who supply milk or grain to Glanbia.
“The GAP Scheme has been developed because it became clear to the Co-op Board that the depth and duration of the current downturn in global market prices required additional measures to support our active members at this time.”
The €55m Glanbia Advance Payment (GAP) Scheme is being funded by Glanbia Co-operative Society through the launch of an Equity-Linked Exchangeable Bond.
The Co-op will raise €100m by issuing a five-year exchangeable bond linked to a pledge of approximately 4.3m Glanbia Plc shares. The Co-op retains full ownership of the 4.3m shares unless the exchange is exercised.
For participating milk suppliers who are members of the Co-op
- The GAP Scheme will automatically advance a maximum payment of 2c/L on liquid and manufacturing milk supply (excluding volumes in fixed milk contracts) in any month where the base Glanbia Ingredients Ireland (GII) manufacturing milk price (including VAT) falls below 24c/L.
- Participating member supplier will not incur any interest charge for advance payments from the GAP Scheme.
- The trigger for interest free ‘return’ payment to the GAP Scheme will be a GII base manufacturing price above 30c/L including VAT. Return payments will be set at a maximum of 2c/L.
- The GAP Scheme is available to all manufacturing and liquid milk suppliers that are members of Glanbia Co-operative Society.
- The ‘working bands’ adjustment will be taken into account when determining the trigger points in the operation of the scheme for liquid milk suppliers.
- During the low-volume/high cost production months of November to February inclusive, participating milk suppliers will not be required to make any return to the GAP Scheme – regardless of the prevailing milk price.
- Any advance payments which are not recovered by the GAP Scheme by the end of 2019 will be recovered over the months of January to December 2020.
For participating grain suppliers who are members of the Co-op
- The advance payment on 2016 grain deliveries is set at €20 per tonne (on a maximum volume equal to the grower’s 2015 harvest supply).
- The trigger for a grain advance payments from the GAP Scheme is a MATIF (Euronext exchange) price of €180 per tonne of wheat. This is equivalent to a green wheat price of approximately €135.
- As this payment trigger for 2016 has been reached, Glanbia Agribusiness will write to members offering GAP Advance and members will have a 1 month window to apply.
- Successful applicants will receive payment in September 2016 for green grain or the applicable contract payment date for dried grain.
- The 2016 trigger for a grain ‘return’ payment to the GAP Scheme is a MATIF (Euronext exchange) price of €205 per tonne of wheat. This is equivalent to a green wheat price of €160 per tonne.
- After 31 July 2016, if the trigger is reached, ‘return’ payment to the GAP Scheme must occur within 12 months, facilitated by grain contra or grower cheque at Glanbia’s discretion
Equity-Linked Exchangeable Bond
The €55m Glanbia Advance Payment (GAP) Scheme has been created by Glanbia Co-operative Society through the launch of an Equity-Linked Exchangeable Bond.
An exchangeable bond or exchangeable note or exchangeable loan is a type of loan that the holder can exchange into a specified number of shares in the issuing company or cash of equal value.
According to Glanbia, from the issuer’s perspective, the key benefit of raising money by selling Exchangeable Bonds is a reduced cash interest payment.
The Co-op will raise €100m by issuing a five-year Exchangeable Bond linked to a pledge of approximately 4.3m Glanbia Plc shares. The Co-op retains full ownership of the 4.3m shares unless the exchange is exercised.
Given the scale of the Co-op the Board felt it was appropriate to issue an exchangeable Bond to a value greater than the €55m required for the GAP Scheme with the balance available to the Co-op for future general purposes.