How LFDF Ensures Investor Protection

When investing in forestry assets, protection of investor funds is just as crucial as returns. The Latvian Forest Development Fund (LFDF), a newly launched A-rated note issuer on Debitum Investments, has structured its financing model to ensure that investments are well-protected at every stage. With a first-rank pledge on assets, multiple revenue streams ensuring cash flow, and a financing model designed for sustainable growth, LFDF offers a structured and scalable investment opportunity backed by an experienced leadership team and a disciplined financial strategy.

First-Rank Pledge: Strong Collateral Protection

LFDF’s investment structure ensures investor protection through a first-rank pledge on assets, meaning Debitum investors have primary claim over pledged collateral. In the unlikely event of liquidation or restructuring, this structure guarantees that:

• Investor claims are prioritized, as Debitum investors hold the first legal rights over pledged assets.
• LFDF ensures investor protection by limiting new financial indebtedness, preventing excessive leverage. Additionally, related party loans are subordinated, ensuring that any prior financial commitments do not impact the security of Debitum investors.
• LFDF’s financing structure is secured through a pledge on company shares, claim rights, inventory, and production assets.

Instead of traditional mortgages, which can limit business flexibility, LFDF secures its financing through a pledge on all company shares and assets. This includes receivables, timber stock, and other non-registrable assets, ensuring that investors remain protected while LFDF efficiently manages and expands its portfolio.

Beyond structural safeguards, LFDF’s leadership brings extensive experience in financial and asset management, reinforcing responsible decision-making. CEO Janis Upenieks has held roles as Economic Advisor to the Latvian Prime Minister, Parliamentary Secretary at the Ministry of Economics, and Board Member at BONO, a leading wood processing company. His expertise in forestry investment and economic policy ensures that LFDF operates within a well-regulated and financially sound framework, strengthening investor protection.

Sustainable Revenue Streams Ensuring Stability

Investor protection isn’t just about pledged assets—it’s also about ensuring that LFDF has stable revenue sources. The fund does not rely solely on land sales to generate returns but instead maintains continuous cash flow through multiple forestry-related activities. These revenue streams include:

• Selective timber harvesting, allowing LFDF to monetize land while it is being held.
• Agricultural land separation and sales, extracting additional value from mixed-use properties.
• Biomass and pulpwood production, ensuring that lower-quality timber is still monetized.

These ongoing income sources help cover operational expenses and interest payments, reducing financial risk and ensuring that investor returns are met on time. Additionally, LFDF’s advanced sourcing and valuation methods ensure that only high-potential properties are acquired, minimizing investment risk.

LFDF’s Board Member Gatis Melderis, who has over a decade of experience in forestry business development. His expertise in evaluating forest properties and optimizing land use ensures that investments are managed efficiently, further reinforcing investor protection.

Scalable Growth While Maintaining Investor Protection

LFDF’s financing model ensures that as more funds are raised, the company’s asset base grows proportionally. This is reinforced by a covenant in the investment prospectus, which limits how much financing can be raised relative to the total asset value, maintaining financial discipline and investor protection.

A covenant is a rule written in a financial agreement that a company must follow. In LFDF’s case, this covenant prevents the company from borrowing or raising more capital than the total value of its owned forestry assets. This means that at any given time, the company cannot take on excessive debt beyond what is supported by its real assets. This ensures that every euro invested is backed by tangible, income-generating forest properties, reducing financial risk and reinforcing investor protection.

Latvia’s forestry sector is also experiencing a strong upward trend. From 2016 to 2024, forestland prices have steadily increased, positioning LFDF for continued growth. With a total acquirable forest volume of over 10 million cubic meters in privately owned forests, and LFDF currently holding just 2% of this market, the fund has significant room to expand while maintaining financial discipline.

LFDF has already proven its ability to attract and repay financing. The fund secured and successfully repaid €7 million from Mundus Bridge Finance, managed by INVL, one of the largest investment management firms in the Baltics. Its ongoing collaboration with Debitum Investments further supports a sustainable and well-managed financing structure, allowing the fund to scale responsibly.

A Secure and Structured Investment in Forestry

Investing in forestry offers long-term value appreciation, and LFDF has built a financing model that prioritizes investor protection while enabling growth.

• Debitum investors hold a first-rank pledge on pledged assets, ensuring priority over other creditors.
• Sustainable revenue streams from timber harvesting, land sales, and biomass production provide ongoing cash flow.
• A controlled financing structure ensures that investment exposure remains fully asset-backed.
• An experienced leadership team with backgrounds in forestry investment, public policy, and business development ensures disciplined growth.

By combining these protection measures with a scalable investment strategy, LFDF offers a well-structured, high-return opportunity for investors looking to participate in Latvia’s growing forestry sector.

This is a marketing communication and should not be interpreted as investment research, advice, or an endorsement to invest. The historical performance of financial instruments is not indicative of future outcomes. Investing involves risks; the value of investments may fall as well as rise. Be sure to assess your knowledge, experience, financial situation, and investment goals before investing.