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A cheese wheel backs up this deal

An Italian company is selling bonds based on Parmesan

An Italian dairy co-operative has sold bonds backed by Parmesan cheese, the company said, a rare example of one of the country’s plethora of small firms raising funding on capital markets.

Three years of recession have choked bank lending and Prime Minister Matteo Renzi’s government is trying to encourage firms to raise money elsewhere and take advantage of a tentative economic recovery.

Cheese maker 4 Madonne Caseificio dell’Emilia has done just that, raising six million euros ($6.55 million) in mini-bonds guaranteed by wheels of Parmesan.

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4 Madonne’s chairman said it would use the money raised in the bond issue to improve its facilities and promote the thick-rinded cheese it makes in Italy’s northern gastronomic heartland Emilia Romagna.

More than 95 per cent of Italian companies have fewer than 10 employees and traditionally rely on bank lending for financing.

But banks’ willingness to provide credit has eroded as bad loans piled up on their balance sheets during the recession, making it harder for smaller, more vulnerable companies to get funding.

The government wants to spur lending to boost the economy, which is estimated to have grown about 0.8 per cent last year.

4 Madonne’s bonds will pay a fixed yield of five per cent each year until they mature in January 2022.

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