| Area lending institutions received letters late this week
requesting their participation in the Rocky Mountain Sugar Growers
Cooperative financing package.
Some growers may need financial assistance to purchase shares and
delivery rights in the co-op. A co-op financing company is being proposed
to create a pool of money from participating lenders that can be used by
these growers.
"What is being proposed is a creative arrangement," said Todd
Peterson, president of Pinnacle Bank in Torrington and a proponent of the
co-op. "But right now its like the chicken and the egg."
In this case, complete financing arrangements will not be finalized
until after growers have committed their down payments. Then the amount of
money required to fund the co-ops lending will be known.
"Usually the loan amount comes first, but I think this is a good
vehicle for the operators who dont want to use their equity capital or
existing lines of credit for their purchase of shares in the co-op,"
Peterson said.
A lead bank will be designated for the entire purchase loan. It will
request a Business & Industry Loan Guarantee. That loan guarantee will
not exceed 60 percent of the loan, and will not exceed an aggregate of $25
million, according to the letter.
The remainder of the $78 million purchase price will be raised from the
growers who will pay $185 per acre for delivery rights in the co-op.
Growers must make a $35 per acre down payment be the end of January, and
may borrow the remaining $150 per acre from the co-op.
The lead bank will then enter into participation agreements with each
bank that wishes to participate in the grower finance project.
The letter requests an interest rate of 9 percent from the banks, and
the finance company will re-loan to growers at 9.25 percent.
Suggested changes to the loan documents by banks will be made before
the loan packets are sent to growers.
The growers bank will hold an assignment of the beet check in order
to allow for the annual amortization payment on the loan to the pool to be
withheld from the beet check.
The bank secures its loan through the co-op finance company, and the
farmer signs a note with the finance company.
"In the end, the farmer will be responsible for the payment to the
co-op finance company whether he gets enough dividends from the co-op to
cover it or not," Peterson said.
Randon Wilson, co-op attorney, said Friday the loan guarantee will be
in place before dispersal to growers is made about a month from now.
"When we know how many subscribers we have, well determine the
level of the loan," he said.
"This pool will be good for the marginal and the strong
growers," Wilson said. "It wont mess up their line of credit
with their own lenders, and yet they get the financing they need." |