The moovable collateral creates an interesting structuring and servicing challenge, according to one banker away from the situation, who noted that “if you’re enforcing, that means showing up with a truck and hoping the cows are still there.”

Enforcement would also carry considerable reputational risk — French farmers are politically powerful and the industry is seen as strategic. The French government notoriously intervened to block the hostile takeover of yogurt maker Danone on the grounds of strategic significance.

There’s unlikely to be a herd mentality with this transaction — it’s a funding transaction marketed privately, and the most likely buyer is a French bank, rather than a traditional ABS asset management firm.

French dairy farming has been under pressure. According to trade publication Agriland, more than a quarter of French dairy farms closed over the 10 years between 2010 and 2020. Farms typically use a variety of secured financing products already, including mortgages on land and leases for agricultural equipment, leaving few assets available to be further encumbered.

A securitisation portfolio manager, not involved in the deal, said: “If it had a PIK coupon in steak I would buy that PA [personal account]”.

It’s not udderly ridiculous [Ed: you’re milking this]. Esoteric ABS has a long history, with assets including music and pharmaceutical royalties, franchise restaurant fees, shipping, aircraft and rail leasing all traditionally included in the category.

US markets have usually been the destination for most of these asset classes, though the growth in asset-backed private credit on both sides of the Atlantic has allowed securitisation to go beyond the limited public markets.

One distinct asset class pioneered in Europe was taking security over Parmesan cheese and Parma ham — both of these improve in value with age, effectively improving the collateral pool. The aging process, however, is capital-intensive so producers are incentivised to finance the aging cheeses before sale.

A Paris-based securitisation lawyer noted that it is possible to take security over livestock using a chattel mortgage (the etymology of “chattel” and “cattle” are the same, deriving from the Old French), which could give a legal basis for a securitisation.

Alantra declined to comment as the deal is private.