Locus lands biosurfactant loan and collaboration

The specialty chemical firm Locus Fermentation Solutions has secured $117 million to expand its biosurfactant business. The money comes in the form of an unusual loan that uses Locus’s intellectual property (IP), including more than 1,300 patents, as collateral.

Locus uses custom microbial fermentation to produce specialty surfactants. Most of the firm’s products are based on sophorolipids, biosurfactants with hydrophilic sophorose sugar heads and various hydrophobic fatty acid tails. CEO Andy Lefkowitz says the loan will help pay for a capacity expansion underway that will triple overall factory space to 14,000 m³ at Locus’s headquarters site in Solon, Ohio, and other locations.

Locus is organized as a holding company with operating companies focused on different markets. Lefkowitz says the firm’s fastest-growing market is oil drilling and mining, where its surfactants can increase yields and lower carbon intensity.

One of the companies, Locus Performance Ingredients, recently signed a pact with Veolia Water Technologies & Solutions to develop water and wastewater treatment products based on sophorolipids. Locus also has a deal under which Dow is the exclusive supplier of Locus’s sophorolipids in the home care and personal care markets.

The specialized structure of the loan could signal increased interest by sophisticated financiers in industrial biotechnology and cleantech. The investment bank Jefferies arranged the deal, which includes an insurance policy on Locus’s intellectual property written by six boutique insurance firms.

“IP-backed lending could be a great choice for growth-stage companies where the debt serves as an alternative to raising dilutive equity,” says Matt Lucas, managing director at the cleantech finance firm Tuatara Development Capital. “That appears to be the case with Locus.” Lucas cautions, however, that such deals are only good fits for companies with strong technology patent portfolios and existing streams of revenue.