ZURICH, SWITZERLAND, October 28, 2003
– The International Finance Corporation (IFC), the private sector arm
of the World Bank Group, will provide EUR 86 million to OOO Kronostar,
a company engaged in manufacturing of Medium Density Fiberboard (MDF) and
particleboard in the Russian Federation. The financing will support
the installation of new particleboard and MDF production lines. These
wood panel materials are used to produce flooring, furniture components
and wall-paneling products.
The loan financing consists of a EUR 43 million for IFC’s own account,
and a syndicated loan with Raiffeisen Zentralbank Österreich AG (RZB) as
a joint arranger, and other commercial banks, for EUR 43 million. The
total expansion project cost amounts to EUR 183 million.
Kronostar was established in 2002 as a limited liability company owned
100% by Krono Holding AG, a company established and headquartered in Switzerland.
Krono Holding AG is a European leader in wood panel board manufacturing.
The new Kronostar facility was built on the site of the former financially
distressed AOO Sharjadrew timber combine and is located in Sharja in Kostroma
Oblast, 600 kilometers north-east of Moscow. IFC’s investment will
have a significant developmental impact given the plant’s location in
a predominantly rural area where the need for economic diversification
and employment generation is particularly acute.
This transaction will strengthen the Russian wood paneling industry by
enabling the incorporation of leading technological and management know-how
and modernization. The wood materials industry has suffered from
inadequate investment to support modernization since the Russian financial
crisis. Further, the lack of locally-manufactured wood panels has placed
Russian furniture producers at a severe disadvantage.
Richard Ranken, Director of IFC’s General Manufacturing and Services Department
noted: “The financing demonstrates IFC’s continued commitment to develop
the private sector in the Russian Federation. This operation directly
addresses both the need for efficient downstream conversion of Russia’s
natural resources into more profitable value-added products, and the forestry
products sector’s need for long-term investment.”
RZB's Board Member Karl Sevelda, in charge of Austrian and international
corporate business, was pleased to sign the agreement with IFC: "We
are proud being joint arranger with IFC for this transaction. It confirms
RZB's good cooperation with IFC, especially the growing importance as an
IFC participating bank, and emphasizes our leading position as project
finance partner in Russia and the whole CEE region."
Russia has joined IFC in 1993. Since then IFC has invested over $1.3
billion to finance nearly 70 projects across a variety of sectors. IFC
significantly increased its investment program in Russia in the last two
years, investing $217 million in FY02 (July 1, 2001 – June 30, 2002) and
nearly $500 million this fiscal year. IFC’s increased activity reflects
the improving investment climate in Russia, greater opportunities in an
increasingly broad range of sectors, and stronger foreign investor interest.
The mission of IFC (www.ifc.org) is to promote sustainable private sector
investment in developing countries, helping to reduce poverty and improve
people's lives. IFC finances private sector investments in the developing
world, mobilizes capital in the international financial markets, helps
clients improve social and environmental sustainability, and provides technical
assistance and advice to governments and businesses. From its founding
in 1956 through FY03, IFC has committed more than $37 billion of its own
funds and arranged $22 billion in syndications for 2,990 companies in 140
developing countries. IFC's worldwide committed portfolio as of FY02 was
$16.7 billion for its own account and $6.6 billion held for participants
in loan syndications.
The project was processed as part of IFC’s Global Manufacturing and Services
Department’s forestry products sector portfolio, which holds under management
$600 million of wood panel and pulp and paper investments globally.
RZB is the central institution of the Austrian Raiffeisen Banking Group,
the country's most powerful banking group. RZB considers Central and Eastern
Europe as its home market and operates a network of 14 subsidiary banks
with 700 banking outlets, as well as two representative offices, in 15
markets of the region. In September 2003, The Banker, the renowned
magazine of the Financial Times group, has awarded the prestigious
prize "Bank of the Year 2003" to RZB and its network banks in
Belarus, Bosnia and Herzegovina, Serbia and Montenegro and Slovakia.