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October 18, 1999
The International Finance Corporation and Erste Bank are joining the Kronospan Group, a European leader in wood panel board manufacturing, to invest US$23.6 million in Kronospan Bulgaria EOOD (KBE), a particleboard plant located near Bourgas in eastern Bulgaria, on the Black Sea coast.
KBE will utilize the investment to double its particleboard production used for making countertops, wall panels, doors, and laminate floors. KBE was established in 1996 as a private company owned by the Kronospan Group.
The European particleboard industry is being restructured and consolidated resulting in the shutting down of inefficient mills. In line with this trend, KBE's added capacities will enhance its competitive position with world-class technological and management know-how and modernization of its manufacturing systems.
IFC's financing for the $56.2 million project consists of a loan for its own account of $13.6 million and a syndicated loan of $10 million for the account of Erste Bank.
The loan agreement was signed in Bulgaria by Mr. Harold Rosen, Director of IFC's Central & Southern Europe Department. Mr. Rosen, who has been meeting with Bulgarian government officials and business groups during a visit to the country, said that the investment is a signal of IFC's continued commitment to develop the private sector in Bulgaria, despite current economic challenges. It would demonstrate how a previously state-owned enterprise can be transformed into a highly efficient and profitable private sector company. He added that the new financing directly addresses the Bulgarian industrial sector's critical need for long-term investments.
The project, which is geared for export, will increase net foreign exchange earnings for the country. In addition, its high quality, competitively priced products will replace imported products used in the manufacture of particleboard, thereby resulting in foreign exchange savings.
KBE's plant and processes will comply with World Bank Group environmental, health, and safety guidelines.
The mission of IFC, part of the World Bank Group, is to promote private sector investment 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 to governments and businesses. To date, IFC has approved $130 million in investments in eight projects in Bulgaria with a total cost of $462 million.
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