BERLIN, May 30 -- The International Finance Corporation (IFC) today signed a US$75 million loan agreement with AO Volga, a recently privatized newsprint paper mill in the Russian province of Nizhny Novgorod. The agreement was signed at a ceremony hosted by Herlitz A.G., the parent company of Herlitz International Trading A.G., the largest shareholder in AO Volga, also responsible for the management of the Russian mill. Herlitz A.G. is one of the largest producers of school, office, and stationery supplies in Europe. "This investment is a milestone signaling Russia's entry into the world economy and opens a door to further investment by German and European companies, following Herlitz's lead," said Boris Nemtsov, Governor of Nizhny Novgorod. The financing package signed today comprises a loan of up to US$30 million for IFC's account and a syndicated loan of US$45 million for the account of participants including Dresdner Bank AG, Westdeutsche Landesbank Girozentrale, Berliner Bank, DB (Belgium) Finance S.A., a
member of the Deutsche Bank Group, and Raiffeisen Zentralbank Osterreich AG. This is the largest commercial loan syndication for a Russian manufacturing project to date. In addition to arranging the loan financing for AO Volga, IFC has made an equity investment of US$11 million. The UK Know How Fund provided technical assistance to the project. The investment program is designed to establish AO Volga as a newsprint manufacturer of international standard while increasing production and improving the mill's environmental controls. With the completion of the investment program, AO Volga will meet the rising domestic demand for newsprint, driven by a growing free press, and compete internationally in the export market. Present at the signing ceremony were the Governor Boris Nemtsov of Nizhny Novgorod, Senator Elmar Pieroth, Senator Norbert Meisner, Peter Herlitz, Chairman of the Board, Herlitz A.G, Gérard Jaslowitzer, Chairman of the Board, Herlitz International Trading, Klaus-Jürgen Leipold, President of AO Vol
ga, Vasiliy Lapukhin, Chairman of the Board of AO Volga, Vladimir Polenov, Russian Embassy, and Anthony Doran, Manager, IFC. Also present were representatives from the five banks participating in the loan syndication. (More) Press Release No. 95/107, page 2 of 2 IFC's investment in this newsprint manufacturer is a natural progression of the Corporation's pioneering work in Russia, beginning in 1992 with small-scale privatization. In close partnership with the reform-minded leadership of the Nizhny Novgorod province, IFC developed and implemented small-scale privatization models that were replicated across Russia. As of June 1994, 72 percent of all small business available for privatization were sold through this method. IFC subsequently assisted the Russian State Property Fund (GKI) in organizing the "first wave" of voucher auctions, selling off medium and large-scale enterprises, in five Russian regions. IFC's on-going privatization activity involves the design and implementation of agricultural land privati
zation. The IFC model was adopted by the Russian Government as a national program in April 1994 and the scheme is now being implemented in four regions directly by IFC with other regions replicating the IFC agricultural land model. IFC is a member of the World Bank Group and is the largest multilateral source of equity and loan financing for private sector projects in developing countries.