* IFC’s Post-Financial Crisis Support
for Turkey Nears $340 Million
Washington D.C., May 21, 2001—The International Finance Corporation,
the private sector development arm of the World Bank, will support a key
Turkish packaging materials manufacturer with a US$10 million loan to help
the company overcome its working capital shortages, which are accentuated
by the fall in domestic demand caused by Turkey’s recent financial crisis.
The IFC investment in Modern Karton will help finance the working capital
needs of the company as it seeks to achieve full capacity utilization and
boost exports to make up for the reduction in domestic demand. Modern
Karton is one of the key private sector producers of corrugating packaging
materials in Turkey, with the third largest capacity in Europe. Modern
Karton’s plant is located in Corlu, 180 km west of Istanbul, where it
has easy access to raw materials, power and energy resources, and transportation
“The IFC investment in Modern Karton, a large employer and well-regarded
company, reflects our goal of supporting key private sector companies to
help them recover from the recent financial crisis,” said Khosrow Zamani,
IFC’s Director for Southern Europe and Central Asia. “Companies like
Modern Karton need to remain strong for Turkey’s economy to recover fully.”
The investment marks IFC’s second in the company. In 1998, IFC made
a $30 million loan to the company for its capacity expansion program. From
1998-2000, the company successfully raised its capacity from 90,000 tons
p.a to 290,000 tons p.a. The company expects to reach full capacity
utilization within the next two years, enabling it to export up to $30
million a year.
Modern Karton has traditionally relied on long-term finance for its working
capital needs. “However, loan maturities exceeding even a one year
range are currently not readily available on the Turkish market,” said
Sujata Lamba, IFC’s Country Manager for Turkey. “Companies that seek
to boost exports and maintain stable financing sources require longer maturity
“The investment in Modern Karton will create new employment in the paper
plant, increase waste paper recycling, improve energy efficiency through
co-generation, disseminate modern technologies and advancements in paper-making,
and support the industrial packaging sector at a time of curtailed domestic
demand,” Lamba said. “We are pleased to continue working with Modern
Karton, and bolster the private sector as it attempts to offset domestic
recession,” she added.
Modern Karton is majority owned by the Eren Group, a diversified, family-owned
company. The Eren Group has eleven companies in textiles, cement
and paper sectors, a joint venture in Germany for import/export activities,
and a cogeneration plant in Corlu, adjacent to Modern Karton. The
Eren Group is headquartered in Istanbul.
The IFC investment marks the Corporation’s eighth Turkey investment in
less than a year. Since April 2001, IFC has invested nearly $340
million in a wide range of companies and financial institutions to help
weather the current economic difficulties. The investments have been
aimed at boosting export revenues, improving efficiency, expanding production,
and replenishing working capital.
“Turkey’s private sector has shown a substantial amount of resilience
in the past few months,” Mr Zamani said. “We feel that our role
will continue to grow as the corporate sector in Turkey embarks on a growth
plan,” he added.
Turkey is an important country for IFC, the fourth largest exposure accounting
for about 4.5 percent of IFC’s global portfolio. IFC’s held portfolio,
including amounts mobilized from commercial banks, is close to $1 billion.
IFC’s mission 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, and provides technical
assistance and advice to governments and businesses. Since its founding
in 1956, IFC has committed more than $31 billion of its own funds and arranged
$20 billion in syndications for 2,636 companies in 140 developing countries.
IFC’s committed portfolio at the end of FY01 was $14.3 billion.