Chile's Sociedad Inversora Forestal (SIF) is preparing to issue the country's first forestry-backed bond this year via local investment bank IM Trust. "The objective is to create a new financial instrument to make capital available to the forestry sector," said Michele Golodetz, the CEO of SIF. Stimulating forestation is another aim of the $12.5 million deal, she added.
The bond is basically a future flows transaction. SIF has signed land-use contracts with individual property owners in the seventh and eighth regions in Chile, where timberlands are most lucrative. As part of the deal, SIF has also secured long-term administration contracts with two of the country's leading forestry companies, Forestal Mininco and Forestal Millalemu. SIF currently holds land-use contracts and purchase options covering 4,073 hectares of Radiata Pine, a major export of the Chilean economy. The deal is also backed by land-use contracts for nearly 3,000 hectares of bare land to be planted in 2003 with Radiata pine and Eucalyptus Globulous. The two operators are responsible for managing the timberlands and have agreed to buy all the volumes harvested on SIF's properties. The value of the products is based on the volumes received at the intermediate or final consumption destination and is based on a market reference price.