LFDF II: the next stage of forest portfolio growth
Latvian Forest Development Fund (LFDF), one of the financing partners available through Debitum, has announced the establishment of LFDF II – the next stage of its long-term growth strategy.
According to LFDF, the existing portfolio has grown to more than 7000 hectares of forest and related agricultural land. Its focus will increasingly shift toward active portfolio management, optimization and long-term value development. LFDF II has been established as a separate company to continue acquiring forest and related agricultural land and build a new portfolio, while sharing the same team as LFDF. Company describes LFDF and LFDF II as two stages of the same broader strategy. However, they are separate entities with separate portfolios. For Debitum investors, this means that LFDF II offerings should be assessed based on the LFDF II documentation, the terms of each offering and the risks related to the new issuer.
One strategy, two stages
The existing LFDF portfolio will continue to be managed and developed, with a focus on:
- increasing forest value
- efficient portfolio management
- long-term asset growth
LFDF II will focus on acquiring new forest properties and related agricultural land and expanding its own portfolio. LFDF has stated that the next milestone is to acquire next 10 000 hectares under management.
This approach allows LFDF to continue developing the existing portfolio while pursuing new acquisition opportunities through LFDF II.
The establishment of LFDF II does not replace the existing LFDF portfolio. Instead, it separates two stages of the strategy: managing and developing the existing portfolio and building a new portfolio through further acquisitions.
Why LFDF established LFDF II
According to LFDF, the company is receiving an increasing number of acquisition opportunities directly from landowners.
LFDF attributes this to the long-term relationships and market presence it has developed over time. LFDF II provides a separate structure through which the company can pursue these new opportunities while the existing LFDF remains focused on its established portfolio.
LFDF II is a newly established issuer with its own Notes Programme. Each Series issued under the Programme will have its own Final Terms, including its interest rate, maturity, ranking and other applicable conditions.
Investors should therefore assess LFDF II separately from previous LFDF-related investments and review the documentation of each individual offering.
Initial offerings will be Junior Series
The LFDF II Notes Programme allows the issuance of both Junior Series and Senior Series.
Initial offerings expected to be available through Debitum will consist of Notes designated as Junior Series. Senior Series may be introduced in future issuances. This means that the first LFDF II offerings are not expected to provide a choice between Junior Series and Senior Series. Initially, only Junior Series are expected to be available. However, understanding the difference between the two is important because Senior Series may be introduced later and the ranking determines the order in which payments and recoveries are allocated.
Junior Series and Senior Series explained
Junior Series and Senior Series are Notes issued by LFDF II under the same Notes Programme. The main difference is their position in the repayment structure.
Junior Series
Junior Series rank below Senior Series in the Priority of Payments.
If Senior Series are outstanding, payments due under Senior Series are made before payments due under Junior Series. The same order applies when proceeds from the enforcement of the collateral are distributed. This means that Junior Series have a higher ranking-related risk than Senior Series. This position may be reflected in a higher potential return. However, the actual interest rate, maturity and other terms will be specified in the Final Terms of each offering.
The initial LFDF II offerings expected to be available through Debitum will consist of Junior Series. Investors should consider whether this position within the repayment structure matches their investment objectives and risk tolerance.
Senior Series
Senior Series rank ahead of Junior Series in the Priority of Payments.
If both Senior Series and Junior Series are outstanding, payments and recoveries due under Senior Series are allocated before those due under Junior Series.
This gives Senior Series a more conservative position within the repayment structure compared with Junior Series.
Senior Series are not expected to form part of the initial LFDF II offerings through Debitum but may be introduced in future issuances.
Repayment priority does not guarantee repayment. Senior Series investors remain exposed to the risks related to the issuer, its operations and the terms of the relevant offering.
A simplified comparison is:
- Junior Series: lower repayment priority and a higher-risk position within the structure, with the potential for a higher return
- Senior Series: higher repayment priority and a more conservative position within the structure
The terms “Junior Series” and “Senior Series” describe their ranking within the LFDF II financing structure. The specific interest rate, maturity and other conditions of each Series will be set out in the relevant Final Terms.
Explore available LFDF II investments
This article provides a simplified explanation for informational purposes. The LFDF II Base Prospectus, the applicable Final Terms and the issue-specific summary contain the complete and legally binding information.
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.