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.