TALLINN, ESTONIA, December 7, 2000 —
The International Finance Corporation is encouraging the expansion and
modernization of Estonia’s largest industrial company and biggest exporter,
through loans to the Krenholm Group textile makers. The Netherlands
Government provided funding for the technical and advisory assistance to
Krenholm to address its strategic market, technical, and management issues.
IFC will lend Krenholm €8 million (US$7.1 million) for its own account
and a further €11.4 million ($10.1 million) from participant banks, in
IFC’s first loan syndication for Estonia. The €25.8 million ($23
million) package will finance physical improvements and help the company
to undertake a strategic refocus. The Nordic Investment Bank (NIB)
and Nordic Environment Finance Corporation (NEFCO) are also expected to
provide substantial financing.
Krenholm is a vertically integrated producer of cotton-based textiles,
including bed sheets, towels, upholstery fabrics, garments, and furnishings.
With annual sales of about €80 million ($71.2 million) and approximately
4,500 employees, Krenholm is the largest industrial company and exporter
in Estonia with more than 80 percent of sales exported, primarily to Western
Europe and the US.
The investment is designed to make Krenholm more competitive by expanding
the product range to include higher value-added products, reducing energy
expenditures, streamlining operations to make better use of machinery and
infrastructure, and improving the company’s capital structure. A
reduction in steam and electricity consumption will improve environmental
quality as well.
The Krenholm Group was established in Narva in 1857, then re-privatized
from Soviet-era state ownership in 1995 when the well-established Swedish
textile company Borås Wäfveri became sole owner. Krenholm has effectively
handled the transition from public to private ownership and from total
dependence on the former Soviet market to competitive western markets.
Over the past four years, Krenholm has increased capacity utilization,
introduced new products, accessed new markets, and managed profitability
by shifting away from low-margin products such as yarn and gray fabric,
to high-quality upholstery fabrics, higher value designed fabrics, bed
linens, and towels.
The mission of IFC within the World Bank Group is to promote private sector
development in developing countries, which will reduce poverty and improve
people's lives. IFC finances private sector investments in the developing
world, mobilizes capital in the international financial markets and provides
technical assistance and advice.
IFC has been active in Estonia since 1993, supporting sound investments
with a strong development impact in industries with high growth potential,
as well as export-oriented projects in sectors where Estonia has a comparative
advantage. Previous IFC investments in the country include the construction
materials, electronics, hotels, leasing, and banking.