`Olive Oil Producer Raises €500K Through Crypto Bonds - Olive Oil Times
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Olive Oil Producer Raises €500K Through Crypto Bonds

By Daniel Dawson
Jul. 25, 2023 17:55 UTC

The French com­pany behind the award-win­ning Tunisian Lamar Olive Oil brand has become the lat­est busi­ness in the sec­tor to exper­i­ment with the blockchain.

While most blockchain-based ini­tia­tives are geared toward trace­abil­ity, Lamar Olive Oil has entered the world of decen­tral­ized finance by issu­ing a blockchain-based bond with Obligate.

SMEs in gen­eral, but olive oil pro­duc­ers in par­tic­u­lar, could ben­e­fit from decen­tral­ized finance both as a way to diver­sify their fund­ing source but also to reduce their fund­ing cost and accel­er­ate their access to financ­ing.- Benedikt Schuppli, chief exec­u­tive, Obligate

A bond is essen­tially a fixed-income loan made by investors to a com­pany. Most bonds are issued in tra­di­tional cur­ren­cies, such as Euros, but Lamar Olive Oil has issued bonds in EUROe, a type of cryp­tocur­rency pegged to a tra­di­tional hard cur­rency known as a sta­ble­coin.

After receiv­ing inter­est from new cus­tomers in France, Lamar Olive Oil sought exter­nal financ­ing to increase pro­duc­tion vol­umes and rev­enues. However, ris­ing inter­est rates made apply­ing for a loan from a bank less viable.

See Also:Decorated Olive Oil Bottles to Be Auctioned as Crypto Assets

“We’ve raised €500,000, which we used to finance our exports with Cauvin, Emil Noël and oth­ers,” Ramzi Lahmar, chief exec­u­tive of Lamar Olive Oil, told Olive Oil Times. ​“The return on our invest­ment was on the order of 400 to 500 per­cent.”

Lahmar said fundrais­ing through issu­ing EUROe had been faster and more reli­able than tra­di­tional fundrais­ing efforts.

“Before, when we went through banks, we had to send a request, tons of paper­work, phys­i­cally go to the bank, make fol­low-up appoint­ments, etc.,” he said. ​“It was infi­nitely long and com­pli­cated.”

“Now that I’ve issued my first bond on Obligate, every­thing will be even faster. If I need liq­uid­ity tomor­row, I can nego­ti­ate it today and receive the funds tomor­row,” Lahmar added. ​“And this is true whether I’m in Hong Kong, Canada, Tunisia, or any­where else. Life is sim­pler.”

Along with less paper­work and reduced lead time between issu­ing the bonds and receiv­ing the fund­ing, Lahmar said that he trusted the con­fi­den­tial­ity of his company’s data to the blockchain.

“In Tunisia, it hap­pened that con­fi­den­tial infor­ma­tion on my busi­ness, which I shared with banks, reached the ears of my direct com­peti­tors,” he said. ​“With Obligate, I am sure that my pri­vate infor­ma­tion is safe and will not be shared.”

Traditionally, com­pa­nies seek­ing to fundraise by issu­ing bonds go through a process that can take any­where from a week to a year, depend­ing on the amounts involved.

First, the com­pany must approach a bank and explain what the financ­ing will be used for before sub­mit­ting finan­cial doc­u­men­ta­tion for the bank’s scrutiny. Usually, the com­pany already needs a credit rat­ing from a rat­ing agency to begin the process.

After all the doc­u­men­ta­tion is sub­mit­ted, the bank does due dili­gence on the com­pany and pre­pares the legal doc­u­men­ta­tion before pre­sent­ing the oppor­tu­nity to investors in Europe’s three main finan­cial hubs: London, Paris and Frankfurt. Once inter­est has been con­firmed, a price is estab­lished, and the bond is placed on the mar­ket.

Benedikt Schuppli, co-founder and chief exec­u­tive of Obligate, told Olive Oil Times that issu­ing EUROe bonds is highly auto­mated, which makes the whole process more effi­cient.

Once Obligate com­pletes its due dili­gence process, he said there is a two-week book-build­ing period when the price of the bonds is estab­lished. ​“Everything is auto­mated, and there is no inter­me­di­ary involved, such as a bank,” he said, which low­ers the costs of issu­ing the bonds.

After com­plet­ing the book-build­ing period, a blockchain wal­let is set up, and investors pay into an escrow smart con­tract in exchange for the bond tokens. The EUROe is then directly sent to the company’s blockchain wal­let and can be con­verted into Euros on a one-to-one basis in a bank account within a cou­ple of days.

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Schuppli believes that this type of fundrais­ing will become more pop­u­lar among small and medium enter­prises (SMEs), such as olive oil pro­duc­ers.

“We cer­tainly believe that access to bank fund­ing has been made more dif­fi­cult in recent times and that SMEs in gen­eral, but olive oil pro­duc­ers in par­tic­u­lar, could ben­e­fit from decen­tral­ized finance both as a way to diver­sify their fund­ing source but also to reduce their fund­ing cost and accel­er­ate their access to financ­ing,” he said.

While mar­ket volatil­ity attrib­uted to ris­ing inter­est rates caused sev­eral other sta­ble­coins to col­lapse, most notably Tether and TerraUSD, Schuppli said that EUROe is unique since it is the only sta­ble­coin backed by reg­u­lated European banks.

He added that Obligate’s ambi­tion is to make the process of fundrais­ing through crypto bonds as com­mon­place as going to a bank to apply for a loan.

“We are strong believ­ers that this tech­nol­ogy will emerge as the main alter­na­tive to bank fund­ing for SMEs and olive oil pro­duc­ers,” Schuppli con­cluded.

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