PRAGUE, June 27—The International Finance Corporation (IFC)
today signed loan agreements totalling US$250 million for Nova Hut, a.s.,
one of the Czech Republic's principal steel producers. The IFC financing,
the largest ever arranged by IFC in the Czech Republic, will enable Nova
Hut to embark on a comprehensive modernization and environmental upgrade
of its steel complex in Ostrava, in the Moravia region of the country.
The project is expected to be completed by 2000 at a total cost of US$650
million. It includes the modernization of the steel making technology and
a shift in the product mix. Moreover, approximately 13% of the investment
program will be spent on an environmental upgrade to bring Nova Hut's facilities
into compliance with the Czech Republic Clean Air Act, which will come
into effect December 31, 1998, and the World Bank's Safety and Environmental
The investment program will reduce Nova Hut's nominal crude steel capacity
by one million tonnes to three million tonnes per year. However, overall
product yield will be improved from the existing 80% level to 92%.
Nova Hut, which is in the process of being privatized, is one of the first
major Czech privatizations incorporating a comprehensive investment program
without a foreign strategic investor. It was originally a producer of long
products such as bars and tubes. Nova Hut is now expanding into higher
value-added flat products in order to diversify its product base and better
serve the needs of its domestic and international customers. At present,
it is an integrated steel company with an annual production capacity of
about four million tonnes of crude steel.
IFC has been working with Nova Hut for almost two years with support from
Dutch, Swiss, U.S., and Japanese trust funds being used to finance environmental
studies, technical studies, market analyses, and strategic management support.
These trust fund-supported efforts proved to be crucial in preparing Nova
Hut for privatization.
"Today's signing is the culmination of more than two years of work
between IFC and Nova Hut," said Mr. Vikas Thapar, IFC's Special Representative
in Europe. "We hope that this successful effort will help encourage
more privatization and modernization in Central and Eastern Europe to enable
them to compete in international markets and better serve their own domestic
"Nova Hut, which has served its customers for over 40 years, is now
operating in highly competitive domestic and international markets, where
an increase in competitiveness can only be gained through reduced costs
and the use of modern technology," said Mr. Jaroslav Petros, Chairman
and General Director of Nova Hut. "This investment program will help
us realize that goal and I am proud to see that we have so many representatives
of the international banking community here supporting us in this process."
The US$250 million financing package consists of a US$75 million, a 12-year
senior loan for IFC's own account and a 10-year senior US$175 million syndicated
loan. The syndicated loan, which was significantly over-subscribed, was
syndicated among a total of 17 international financial institutions from
Japan, Germany, Austria, Korea, U.S., France, and Belgium [list attached].
IFC, a member of the World Bank Group, is the leading multilateral source
of equity and loan financing for private sector projects in developing
List of Participant Banks in the IFC US$175 Million B Loan Syndication
to Nova Hut
Participation BankCountryin US$ millionsDeutsche Bank Germany19Bank
Austria Austria 12 Cho Hung Bank Korea 12 Creditanstalt-Bankverein Austria
12 Fuji Bank Limited Japan 12 Korea Long Term Credit Bank Korea 12 Sakura
Bank Japan 12 Nomura Bank International Japan 10 Long-Term Credit Bank
of Japan Japan 9 Orix Corporation Japan9BACOB Belgium8Banque Worms France8Comerica
Bank USA8IBJ Japan 8 Landesbank Rheinland-Pfalz Germany 8 Mitsubishi Trust
& Banking Corp.Japan8Mitsui Trust & Banking Co. Ltd. Japan8Total175