Facility will Create US$40 Million in Export Finance for Russian Manufacturing Companies
London, UK/Washington D.C., May 13, 2002
—The International Finance Corporation, the private sector development arm of the World Bank Group, and Westdeutsche Landesbank Girozentrale (WestLB) have signed an agreement to establish a US$40 million pre-export finance facility for Russian manufacturing companies. The purpose of the Facility is to provide working capital to private Russian manufacturing companies to finance production of goods and equipment under major export contracts.
“Russian manufacturers which are active exporters need effective access to working capital financing to help them meet the requirements of their trade partners worldwide,” said Peter Woicke, IFC’s Executive Vice President, during the signing ceremony with Hans Henning Offen, Vice Chairman of WestLB’s Management Board. “This export finance facility will strengthen their ability to compete for business in the export markets and help boost Russia’s exports outside of natural resource areas.”
The Facility will provide Russian exporters of manufactured goods financing covering the period of their manufacturing cycle, normally 6-9 months in duration, but possibly longer to accommodate production cycles of more complicated equipment. The Facility has been structured as a risk sharing agreement between IFC and WestLB—as the facility agent, WestLB will directly extend the loans while IFC would share the risk by providing a 50 percent guarantee up to a maximum exposure of $20 million. Compared with many of IFC’s trade enhancement facilities where IFC takes the risk of local banks providing letters of credit, in this project IFC will share in primary manufacturers’ risk.
The IFC guarantee reflects the Corporation’s commitment to supporting active exporters among the Russian manufacturers which face much greater difficulty in obtaining working capital financing than natural resource companies. IFC’s key contribution to project selection process in this Facility is the technical and environmental review of prospective borrowers.
WestLB, IFC’s partner in this pre-export finance facility, is one of Europe’s largest financial institutions and the largest Landesbank in Germany. From September this year, WestLB will be restructured to create two successor-companies: a commercial wholesale and investment bank, WestLB AG, and a public-sector North Rhine-Westphalia Landesbank. WestLB’s presence in Russia dates back to mid-1980s and it now operates in the Russian market through Westdeutsche Landesbank Vostok. Through its knowledge of the Russian corporate sector and its worldwide trade financing network, WestLB is well placed to effectively bridge the gap between the Russian exporters and the offshore purchasers.
IFC’s mission (www.ifc.org) 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 through the close of the last fiscal year on June 30, 2001, IFC 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.
