ZURICH, SWITZERLAND, October 28, 2003
– The International Finance Corporation (IFC), the private sector arm of the World Bank Group, will provide EUR 86 million to OOO Kronostar, a company engaged in manufacturing of Medium Density Fiberboard (MDF) and particleboard in the Russian Federation. The financing will support the installation of new particleboard and MDF production lines. These wood panel materials are used to produce flooring, furniture components and wall-paneling products.
The loan financing consists of a EUR 43 million for IFC’s own account, and a syndicated loan with Raiffeisen Zentralbank Österreich AG (RZB) as a joint arranger, and other commercial banks, for EUR 43 million. The total expansion project cost amounts to EUR 183 million.
Kronostar was established in 2002 as a limited liability company owned 100% by Krono Holding AG, a company established and headquartered in Switzerland. Krono Holding AG is a European leader in wood panel board manufacturing. The new Kronostar facility was built on the site of the former financially distressed AOO Sharjadrew timber combine and is located in Sharja in Kostroma Oblast, 600 kilometers north-east of Moscow. IFC’s investment will have a significant developmental impact given the plant’s location in a predominantly rural area where the need for economic diversification and employment generation is particularly acute.
This transaction will strengthen the Russian wood paneling industry by enabling the incorporation of leading technological and management know-how and modernization. The wood materials industry has suffered from inadequate investment to support modernization since the Russian financial crisis. Further, the lack of locally-manufactured wood panels has placed Russian furniture producers at a severe disadvantage.
Richard Ranken, Director of IFC’s General Manufacturing and Services Department noted: “The financing demonstrates IFC’s continued commitment to develop the private sector in the Russian Federation. This operation directly addresses both the need for efficient downstream conversion of Russia’s natural resources into more profitable value-added products, and the forestry products sector’s need for long-term investment.”
RZB's Board Member Karl Sevelda, in charge of Austrian and international corporate business, was pleased to sign the agreement with IFC: "We are proud being joint arranger with IFC for this transaction. It confirms RZB's good cooperation with IFC, especially the growing importance as an IFC participating bank, and emphasizes our leading position as project finance partner in Russia and the whole CEE region."
Russia has joined IFC in 1993. Since then IFC has invested over $1.3 billion to finance nearly 70 projects across a variety of sectors. IFC significantly increased its investment program in Russia in the last two years, investing $217 million in FY02 (July 1, 2001 – June 30, 2002) and nearly $500 million this fiscal year. IFC’s increased activity reflects the improving investment climate in Russia, greater opportunities in an increasingly broad range of sectors, and stronger foreign investor interest.
The mission of IFC (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, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY03, IFC has committed more than $37 billion of its own funds and arranged $22 billion in syndications for 2,990 companies in 140 developing countries. IFC's worldwide committed portfolio as of FY02 was $16.7 billion for its own account and $6.6 billion held for participants in loan syndications.
The project was processed as part of IFC’s Global Manufacturing and Services Department’s forestry products sector portfolio, which holds under management $600 million of wood panel and pulp and paper investments globally.
RZB is the central institution of the Austrian
Raiffeisen Banking Group
, the country's most powerful banking group. RZB considers Central and Eastern Europe as its home market and operates a network of 14 subsidiary banks with 700 banking outlets, as well as two representative offices, in 15 markets of the region. In September 2003,
, the renowned magazine of the
Financial Times group
, has awarded the prestigious prize "Bank of the Year 2003" to RZB and its network banks in Belarus, Bosnia and Herzegovina, Serbia and Montenegro and Slovakia.