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SKODA SIGNS RECORD LOAN PACKAGE OF DM 1.4 BILLION WITH IFC, EBRD AND 45 BANKS


J.Segal, D. Gustafson


LONDON, Sept. 17 -- A project financing package of DM 1.4 billion in long-term loans was signed in London today between SKODA, automobilova a.s., the Czech affiliate of Volkswagen AG (VW), and a total of 47 financial institutions. This is the largest syndicated bank financing ever provided for an Eastern European company. The arranging group for the financing consisted of the International Finance Corporation (IFC), the European Bank for Reconstruction and Development (EBRD), and four lead banksDresdner Bank, Deutsche Bank Luxembourg, CSFB/Credit Suisse First Boston, and J P Morgan Securities. SKODA, which has a 90-year history of car production based in Mlada Boleslav, about 40 miles from Prague, became an affiliate of VW in 1991. It is planned that VW's present equity share of 31% will rise to 70% by the end of 1995, the remaining shares being held by the Czech Government. SKODA is the largest joint venture to date between Western and Eastern European partners. The company is implementing a 1992-1998 invest
ment program totalling DM 7.8 billion. This involves expansion of manufacturing capacity from 200,000 cars a year to 450,000, including various new models; a new engine plant for 500,000 units a year; and general upgrading and modernization of existing facilities.


The SKODA investment is a key element in VW's production and marketing strategy. As a manufacturing and sales location, the Czech Republic offers VW low production costs, a well-educated industrial labor force, easy access to Western, Central and Eastern European export markets, and a fast-growing domestic market. SKODA is already an integral member of the VW Group, alongside Audi, VW itself, and SEAT; it aims to be a strong competitor in the smaller, lower-priced sector of the volume car market in Europe. The DM 1.4 billion loan package signed in London has three main parts. The first part is IFC's largest-ever loanDM 600 million, consisting of a DM 200 million eleven-year portion for its own account and a DM 400 million nine-year portion funded by commercial banks under IFC's "umbrella". The second part, an EBRD loan of DM 400 million, is similar in structure, with DM 200 million lent for ten years by EBRD for its own account and DM 200 million for nine years funded by the banks, under the EBRD "umbrella".
The third financing element is a DM 400 million six-year direct loan by the banks to SKODA. All commercial banks participate on a pro rata basis in the three facilities. Syndication of the loan package has been a notable success. With Dresdner Bank AG as coordinator and Deutsche Bank Luxembourg as bookrunner, the arranging group achieved significant over-subscription both at the underwriting lead manager level (where 12 banks committed DM 75 million each) and in general syndication (where a further 29 banks committed a total of DM 530 million). Commitments have therefore been cut back substantially. The final list of participating banks is as follows: Underwriting Lead Managers: ABN AMRO Bank, Berliner Bank, Bayerische Landesbank, Bayerische Vereinsbank, Banque Nationale de Paris, BHF Bank, Commerzbank, Credit Lyonnais, ING Bank, Norddeutsche Landesbank, Societe Generale, and Sumitomo Bank. Lead Managers: Barclays Bank, LKB Baden-W¸rttemberg, and Mitsubishi Bank. Managers: Arab Bank PLC, Banca Commerciale Ita

liana, Bank of Tokyo, Banque Indosuez, Creditanstalt-Bankverein, Dai-Ichi Kangyo Bank, De Nationale Investeringsbank, Deutsche Girozentrale, Hypobank, Industriebank von Japan, Invest Kredit, Kredietbank NV, Landesbank Hessen-Th¸ringen, Royal Bank of Canada, and Sanwa Bank. Participants: Banque et Caisse d'Epargne de l'Etat, Banque Francaise du Commerce Exterieur, Comerica-National Bank of Detroit, Fuji Bank, Hamburgische Landesbank, IKB Deutsche Industriebank, Landesbank Berlin, Landesbank Saar, Long-Term Credit Bank of Japan, Nomura Bank Nederland NV, and Sakura Bank.


Dr. Rutbert Reisch, Group Treasurer of VW, said in London today that he was gratified by the widespread support for the SKODA financing shown by such an extensive group of international commercial banks. "While VW and the Czech Government, as sponsors, have a strong and clear commitment to the venture, this is a SKODA project financing for the banks," he said. "It demonstrates the capacity of the international banking community to provide large amounts of finance on the right terms for a properly planned and structured project." IFC, the private sector arm of the World Bank Group, has taken the lead role in the financial appraisal of the SKODA project and in the overall structuring and coordination of the loan package. EBRD has also contributed its largest-ever loan, and the comfort of its lender-of-record status. The financing represents the first instance of both "umbrellas" of the two multilateral agencies, IFC and EBRD, being made available to commercial bank participants. Mr. Wilfried Kaffenberger, Vice
President for Operations at IFC, said "This important project is in line with the Czech Republic's strong industrial tradition, and the signing today is a true testimony of the success of the policies of the Czech Government in support of free market mechanisms and the private sector. IFC is happy to be a part of this effort and to have worked with a pre-eminent Western partner to raise term finance for SKODA so that it can expand and modernize its operations."