Agroforestry & Timber Business
A long-term structured investment designed to refinance existing debt, strengthen working capital, and accelerate the expansion of a growing agroforestry and timber business through a balanced debt-equity financing solution aligned with sustainable operational growth.
Sector
Agroforestry & Timber
Geography
Uganda
Facility Size
Up to USD 20 Million
Structure
Blended Debt + Equity
The Situation
An established Ugandan agroforestry and timber company required capital to refinance existing bank borrowings, fund capital expenditure, and provide additional working capital for the continued expansion of its timber operations. The investment was structured through a special purpose vehicle established outside Uganda to support efficient cross-border financing.
Management's objective was to reduce financing costs while creating a stronger capital base capable of supporting long-term production growth and operational efficiency.
Due Diligence & Structuring
Following detailed commercial, financial, and operational due diligence, the investment was structured with immediate repayment obligations rather than a moratorium period, reflecting the company's established cash-flow profile. Capital deployment was carefully sequenced to first eliminate existing bank debt, followed by capital expenditure funding and staged working capital releases based on operational requirements.
A wider equity return framework was incorporated to reflect the sector's long investment horizon while maintaining an appropriate balance between investor returns and business sustainability.
Challenges & Solutions
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Limited Collateral
Additional third-party security and investment risk insurance were arranged to strengthen the collateral package and improve overall transaction security. -
Investor Exit Strategy
When management declined the introduction of an external equity investor, a complete management buyout structure was negotiated to facilitate a successful investment exit. -
Capital Allocation
Funding was prioritized to immediately refinance existing debt before supporting operational expansion and ongoing working capital requirements.
Key Transaction Terms
Facility
Up to USD 20 million structured as a blended Debt & Equity investment based on enterprise valuation.
Tenor
Ten-year facility with immediate principal and interest amortization from the first month.
Interest Rate
6.5% per annum, compounded annually with long-term repayment scheduling.
Equity Exit
Buyback option after Year 5 with an IRR target of 18–20% and alternative investor exit provisions.
Security
Share pledges, convertible shares, corporate and personal guarantees, and assignment of free cash flows.
Disbursement
Initial funding retired existing bank debt, followed by capital expenditure financing and staged working capital releases based on business requirements.
Investment Outcome
The financing structure immediately reduced the company's reliance on higher-cost bank debt while creating a disciplined capital framework for long-term expansion. By sequencing capital deployment between debt refinancing, operational investment, and working capital support, the transaction strengthened financial stability and positioned the business for sustainable growth within Uganda's timber sector.
