California FreshWorks Fund Term Debt Facility

Report: Catalytic First-Loss Capital

The California Endowment’s goal with the FreshWorks Fund is to increase the availability of healthy food options in areas where there is limited access, particularly low-income communities.


The California Endowment (TCE), JPMorgan Chase Foundation, and the U.S. Treasury’s Community Development Financial Institutions Fund.


Five banks and one insurance company.

Amount and Instrument

USD 7.5 million provided as grants.

Structure and Terms

The term debt structure has three layers: USD 100 million in senior debt, contributed by commercial capital investors (five banks and an insurance company); USD 25 million in sub debt, provided by mission-driven investors, including Calvert Foundation, NCB Capital Impact, and TCE; and usd 7.5 million in first-loss capital in the form of grants from TCE, JPMorgan Chase Foundation, and the CDFI Fund. This reserve serves as a first stop-loss for any individual transaction. If there is a loan default, the loss reserve absorbs the full loss related to the loan.

Each loan made from the credit facility is composed 80 percent from the senior tranche and 20 percent from the sub tranche. In the event of a loss, the CFLC fund can be accessed only to make the senior investors whole (not the junior lenders). In theory, if there is a large loss in one transaction, then the full USD 7.5 million can be drawn down in one instance. Alternatively, it could cover numerous small losses until the full amount is exhausted. Losses exceeding the $7.5 million loan loss reserve would be absorbed by the subordinate investors. At the time of writing this brief, the CFLC fund has not yet been utilized.



TCE was interested in catalyzing more financing for healthy food access. It wanted to see its USD 2.5 million grant leveraged, and feels like it achieved a sufficient return, given the overall size of the term debt facility. Interestingly, TCE, which invested USD 2.5 million in the first-loss tranche, also invested in the sub-debt tranche with usd 15 million from its program-related investments (PRI) pool. The JPMorgan Chase Foundation, meanwhile, also provided a third of the CFLC pool, essentially writing down some risk for JPMorgan Chase, which invested usd 30 million in the senior debt pool. TCE also invested in the sub-debt tranche with USD 15 million from its program-related investments (PRI) pool. From the perspective of participating banks, Community Reinvestment Act (CRA) credits presented an additional motivation beyond the risk protection.


TCE began preliminary discussions with JPMorgan Chase, which were continued by NCB Capital Impact once the latter was appointed as fund administrator. TCE’s upfront provision of a grant for CFLC allowed NCB to find impact investors to participate in the sub debt layer. JPMorgan Chase, meanwhile, led the syndication of commercial investors for the senior layer and contributed to negotiations around the amount of CFLC required and the ratio of senior to sub debt. JPMorgan Chase brought market discipline, credibility, and deal structuring expertise that allowed it to talk convincingly and bring in banking peers to the deal. Importantly, the banks saw foundations as investment partners, and the transaction creatively used different types of capital from players who typically do not co-invest (as described above).



Fund Manager

NCB Capital Impact

Inception Year


Geographic Focus

California, U.S.


10 years

Impact Focus

Increase access to healthy, affordable food in underserved communities, spur economic development, and drive innovation in healthy food retailing.


USD 125 million for loans and 

USD 7.5 million for first-loss

Fund Capitalization

Debt and grants

Investment Period

Up to 10 years

Investment Size


Target Return

Senior tranche: ISDA(R) midmarket swap rate plus 225-275 basis points.

Subordinated tranche: A blended rate (based partly on 10-year US Treasury bonds). As of September 11, 2013 the blended rate was 6.65%.

Management Fees

A fixed portion of the grant to cover start-up operational expenses plus a servicing fee on each loan made from the facility.

Investment Instruments


Investment Period

Up to 10 years

Investment Size

Up to USD 8 million

Track Record

USD 2.5 million deployed across two transactions, as of August 10, 2013

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