Empowering Royal FloraHolland with a new credit line to support its sustainability efforts

How do you get banks on board to provide you with financing on favorable terms when your modus operandi isn’t maximizing profit? Zanders helped Royal FloraHolland find the answer, leading them to secure a new debt facility of €210 million with three banks. Royal FloraHolland is the largest B2B floriculture platform in the world. Operating as a member-owned cooperative has always been the strongest element of Royal FloraHolland’s manifesto - right from its first flower auction back in 1912. But this unique structure also proved to be a complication when it came to refinancing its credit facility. Fortunately, they had Zanders on hand to help frame a compelling case for their future credit requirements.

Harnessing cooperative strength

Royal FloraHolland was first established as a cooperative for growers and sellers more than 110 years ago and is renowned for organizing flower auctions via clock sales. Over the years, as the floriculture trade has become increasingly international and competitive, the role and remit of Royal FloraHolland has expanded beyond flower auctions. Today, it is an international B2B trading platform offering a wide variety of deal-making, logistics, and financial services to its members.

Royal FloraHolland - and as a consequence a large part of the sector - is currently in the midst of a large-scale transformation, focusing on, among other things, migrating to a more digital way of working (via the Floriday platform) and promoting more sustainable practices across the floriculture sector. The refinancing of Royal FloraHolland’s credit facility in 2024 was not only important in terms of securing financial back-up for its day-to-day operations but also to invest in ongoing strategic developments.

Putting in the groundwork

The impending maturity of Royal FloraHolland’s existing credit facility in 2024 prompted the cooperative to appoint Zanders in 2022 to maximize the success of their corporate refinancing process. A process that started with the internal team conducting a lengthy reevaluation of their capital needs in the light of their evolving strategic priorities and ambitions.

“When Royal FloraHolland first reached out to us in 2022, we had a few talks, looked into numbers and analysis, and talked about the questions that they were likely to be asked and where they stood at that point in time,” remembers Zanders' Partner, Koen Reijnders. “This revealed that the future financial projections for the refinancing were not sufficiently substantiated. At this point, there were two options. We could go to the banks straight away with a story that was not finished yet - but this would inevitably lead to questions. Or Royal FloraHolland could take some time to do more homework and go to the banks better prepared. We all agreed the second option was the route to take.”

Due to the scale of Royal FloraHolland’s transformation program, clarifying financial projections and scoping funding requirements was a lengthy process. “We needed to revisit our strategy and really have commitment internally on our strategic implementation route map and corresponding results, which we could present to the banks,” says David van Mechelen, Chief Financial Officer of Royal FloraHolland. “This required the involvement of the total management team of Royal FloraHolland, across all disciplines. It was a burden, but it was also worthwhile because it sharpened our internal planning and alignment and a year later when we came to preparing the pitch for the banks, it was very concrete and thoroughly elaborated.”

With the structure and characteristics of the new facility agreed, in the summer of 2023, the information memorandum was completed. The RFP documents were then issued to the group of banks identified as a good match. In addition to Royal FloraHolland’s existing lenders, a few other banks and the European Investment Bank (EIB) were invited to participate in the process.

Coaxing banks out of their comfort zone

Royal FloraHolland might be midway through a significant transformation strategy, but the ethos at the heart of its business model remains unchanged—connecting growers and buyers to make it easier to trade and do business together, to achieve the best possible market prices for flowers and plants and to unite members to tackle the challenges facing the future of their industry. A large driver behind the organization’s success is its structure as a cooperative. Royal FloraHolland is owned and works primarily in the interest of its members. In order for banks to understand the value of this unique approach required a pitch that was sufficiently compelling to convince banks to step outside of their comfort zone.

“We are a cooperative, and this is not a normal company and that's sometimes hard for banks to understand,” says Wilco van de Wijnboom, Corporate Finance Manager for Royal FloraHolland. “What is it? How does it work? How is our financial model designed? Why are we not making that much profit?”

In addition, unlike more conventional agricultural cooperatives, Royal FloraHolland never owns any products. Because all proceeds from sales through the platform go directly to the growers, funding is not generated through the profit made on selling products. Instead, Royal FloraHolland finances its operations primarily by charging an annual service fee to its members. By removing the cooperative’s interest in the profit derived from trade transactions, it is free to focus its role on enabling the easy exchange of floral products between grower and buyer parties for the best possible price. This is a sound strategy for Royal FloraHolland, but it is not a profit-driven enterprise that fits neatly into the banks’ standard credit rating and modelling processes.

“We have a different business model,” explains David. “Our traded volumes yield €5.5 billion. The service fees derived from the trades generate €500 million. We just raise the tariffs enough every year to breakeven. But the banks want to see profitability. Conceptually, it's very difficult for a bank.”

“Zanders gave us guidelines on how to build the case for the banks, Because many of our investments in the coming years are in sustainability, they advised us to introduce this into the framing of the refinancing and this was an interesting addition to the discussions we had with banks.”

Wilco van de Wijnboom, Corporate Finance Manager for Royal FloraHolland

Building the credit story

Without profit as a leverage for raising finance, Royal FloraHolland needed to carefully frame its refinancing pitch to appeal to the banks and satisfy their due diligence. For this reason, Zanders worked with Royal FloraHolland to demonstrate the soundness of the business, in particular emphasizing its diversification and the crucial role of the cooperative and the platform for the sector. In addition, they introduced sustainability as an extra angle for discussion.

“Zanders gave us guidelines on how to build the case for the banks,” Wilco explained. “Because many of our investments in the coming years are in sustainability, they advised us to introduce this into the framing of the refinancing and this was an interesting addition to the discussions we had with banks.”

Royal FloraHolland is committed to promoting sustainability throughout the floriculture value chain. From reducing CO2 emissions through smarter logistics and investing in more energy-efficient real estate to encouraging the use of more innovative methods to reduce the climate impact of the floriculture sector, such as LED lighting and geothermal and solar energy. The cooperative’s sustainability ambitions became an interesting lever during the refinancing negotiations and made an important contribution to the positive reaction from the banks to the refinancing.

Securing the right terms

The strength of the proposal meant ultimately the refinancing was agreed swiftly, with the agreement signed and sealed in March 2024, well ahead of their previous facility maturing. “From the beginning of the discussions with the banks until we signed the contract was seven months—we did it all in seven months,” Wilco remembers.

This armed Royal FloraHolland with a financing agreement with three banks worth €210 million, giving the group access to both the additional capital they need to invest in its growth strategy and the credit line to absorb fluctuations in liquidity due to business operations. Securing favorable terms (when at times it felt against the odds) is something they largely credit to being able to leverage Zanders’ market knowledge and experience and their handling of the negotiations with banks. This was particularly valuable when it came to addressing the large disparity in the initial quotes received from the banks.

“I realized more than ever during this process how important it is that Zanders was doing most of the negotiations - this was very important,” David adds. “The banks know that Zanders oversees the market so they also know they can't fool Zanders. Plus, it is in the interest of Zanders commercially, to remain a reliable partner and this means not bluffing too much to banks. This adds trust to the negotiation process. And we needed that, especially when working with the banks to adjust their quotes so they were in line with each other.”

The value of independence

This project underscores the value of having an independent debt advisor to navigate your company through the complexities of structuring credit facilities. From developing a compelling business case to present to banks to securing the most beneficial terms for corporate financing agreements, Zanders supports its clients throughout the entire process.

For more information on Zanders’ debt advisory and refinancing expertise, please contact Koen Reijnders.