Washington D.C., June 11, 2002
—The International Finance Corporation (IFC), the private sector development arm of the World Bank Group, will provide financing of up to US$60 million to the retail developer Linstow Varner SIA, to support the development of three landmark retail centers in Riga. This project will give Latvian consumers a wider choice of high quality merchandise and service, at lower prices, from over 500 local and international firms.
“This investment shows IFC’s commitment to support the development of a strong and sound private sector in Latvia”, said Mr. Edward Nassim, Director of IFC’s Central and Eastern Europe Department. “This project fits well with IFC’s strategy to contribute to the modernization of the retail sector in the country, that will help provide efficient facilities to local and international retailers as well as to local consumers.”
The project involves the renovation of the Central Railway Station, including the development of a new retail building in the station, the refurbishment of an abandoned industrial site known as Alfa, and the expansion of an existing retail center. All three projects will create modern retail centers. The total project cost is US$146 million.
IFC’s financing includes a loan of $17 million and a subordinated loan of $8 million for IFC’s own account, as well as a syndicated loan of $35 million for participating banks. The IFC successfully syndicated the loan to the following commercial banks: Landesbank Schleswig-Holstein Girozentrale, Vereins-und Westbank AG, Den norske Bank ASA, Norddeutsche Landesbank Luxembourg S.A., Banque Générale du Luxembourg S.A., and Nordea Bank Finland Plc.
IFC is also attracting an additional parallel financing of $10 million from Nordic Investment Bank (NIB) as well as a loan facility of up to $25 million from a consortium of local banks, bringing the total external debt package to $95 million.
IFC’s financing will demonstrate that longer-term financing is available in Latvia on a project finance basis for non-export oriented projects, and that transparent foreign direct investment can be successful in a challenging business environment.
The renovation of the Riga Railway Station, in addition to its commercial benefits, will also support the city’s public transport infrastructure, by making the railway a more attractive means of transportation and helping relieve traffic congestion. It is estimated that around 170,000 people pass through the Riga Railway Station everyday.
Strengthening the retail sector in Latvia will also help improve transparency and good corporate governance in the country, contributing to reduce the informal, unreported sector of the Latvian economy, which currently represents 30-40 percent of the overall economy.
The sponsors of the project are Linstow AS of Norway (50 percent), a major Scandinavian real estate development company; ICA Ahold AB, part of the world’s 4th largest food retail group Royal Ahold; and Varner-Gruppen AS of Norway, the largest clothing retailer in Norway.
Linstow Varner SIA owns and operates retail centers in Latvia, including “Mols”, “Dole”, “Minsk”, and “Centrs.” Linstow has invested over US$120 million in the Baltics over the past 5 years and is one of the largest foreign investors in the region. Linstow, the Managing Sponsor, has a strong business record and a thorough knowledge in terms of successfully developing modern retail park concepts while supporting the interests of city planners, neighbors, government entities and environmental groups.
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, IFC has 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.