Islamabad, Pakistan, November 18, 2002
—The International Finance Corporation (IFC)—the private sector development arm of the World Bank Group—will invest US$35 million in Dewan Salman Fibre Limited (DSFL), the largest producer of polyester staple fibre in the country.
IFC's financing—consisting of a senior loan of $30 million, a convertible loan of $4 million, and a $1million participation in a convertible preferred stock issue—will assist DSFL to expand its polyester staple fibre capacity by adding a specialty fibre line of 20,000 tonnes per annum, refinance its existing debt, and fund its need for permanent working capital. In addition to IFC funding, the $70 million project will receive a $21 million loan from a syndicate of local banks and $14 million via a convertible preferred issue and internal cash generation. The proposed convertible preferred issue will be the first such publicly listed instrument in the country. The IFC Loan Agreement was signed today in Islamabad.
The planned investment is expected to have a significant demonstration effect both internationally and locally in support of Pakistan’s corporate sector. It should help to improve access by Pakistani corporations to offshore funding while boosting liquidity in the local market. IFC’s support will also encourage other local business groups to pursue refinancing opportunities to bolster their balance sheets and enhance long-term financial sustainability in order to meet the challenges and opportunities of liberalization and tariff reduction under the WTO.
“IFC’s financing will help one of the largest manufacturers of polyester staple fibre in its strategy of lowering costs, producing specialty fibre, and increasing capacity,” said Richard Ranken, IFC’s Director for Global Manufacturing and Services. The proposed investment in preferred stock, the first such issue offered to the general public, will open a new dimension for corporations to raise long-term quasi-equity funds from the local capital markets.”
Mr. Sami Haddad, Director of IFC’s Middle East and North Africa Department, said, “The project is an example of IFC’s commitment to support restructuring and modernization by large companies in Pakistan’s manufacturing sector in order to achieve global competitiveness.”
Mr. Dewan Zia ur Rehman Farooqui, Chairman, Dewan Group, responded, “We are pleased to work with IFC on this long-term financing which will enable us to produce value-added specialty fibre products, reduce our interest costs, and also support our efforts to develop new sources of equity finance from the capital markets.”
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 through FY02, IFC has committed more than $34 billion of its own funds and arranged $21 billion in syndications for 2,825 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY02 was $15.1 billion for its own account and $6.5 billion held for participants in loan syndications.