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| MCS Group |
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| Summary of Proposed Investment |
| This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. |
| Project number | 25170 |
| Company name | MCS Holding LLC |
| Country | Mongolia |
| Sector | Construction and Real Estate |
| Environmental category | B |
| Department | Global Manufacturing & Services |
| Status | Active |
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| Date SPI disclosed | October 31, 2007 |
| Projected board date | December 6, 2007 |
| Previous Events | Invested: June 23, 2008
Signed: May 31, 2008
Approved: May 1, 2008 |
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| View Environmental & Social Review Summary (ESRS), click here |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
Incorporated at Ulaanbaatar in 1993, MCS Group (MCS Group or the company) is one of the leading private enterprises in Mongolia with 15 subsidiaries covering diversified business activities including:
- energy & infrastructure,
- general manufacturing & services,
- information & communications,
- property development, and
- food, beverage & alcohol.
At present, the company is one of the largest private sector entities in terms of number of employees in Mongolia with about 3,000 full-time direct staff and about 1,000 indirect staff through its contractors and subcontractors.
The proposed project has four main components to be implemented during 2007 - 2009:
- capital expenditures to support the expansion and modernization of the MCS Group’s various existing production capacities,
- development of the residential and commercial properties;
- refinancing a part of short-term debt to strengthen the balance sheet of the company; and
- supporting the concept development of the company’s local hospital project. |
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| Project sponsor and major shareholders of project company |
MCS Group is majority owned (73.9%) by Mr. Odjargal, the founder and Chairman of the company, and his brother, Mr. Od. The balance of the company’s shares is owned by individuals, mostly the senior management of the company and by the company itself through the treasury stock. After graduating from the Polytechnic Institute, Kiev, in 1989, Mr. Odjargal worked as an engineer at the Energy Bureau in Mongolia for a few years before setting up his own engineering company in 1993. He has a MBA from Maastricht School of Management. Mr. Od, the older brother of Mr. Odjargal, graduated from Moscow University of Foreign Relations with a bachelor’s degree and from Oxford School of Foreign Service with a master’s degree and had served as a diplomat for many years before joining the company.
MCS Group is managed by the shareholders through MCS Holding LLC (MCS Holding), a limited liability company incorporated in Ulaanbaatar, which then directly owns subsidiaries of the company. As a parent company, MCS Holding involves only in key decision making for each subsidiary such as major capital expenditure or partnership selection and provides various group-level services including finance, human resource, legal, insurance, global marketing & media communications to its subsidiaries, while each subsidiary’s day-to-day operation is managed by a professional management team experienced in its own business independently from the MCS Holding’s management. |
| Total project cost and amount and nature of IFC's investment |
The proposed IFC investment consists of:
- an A loan of up to $15.0 million; and
- a C loan of up to $10.0 million with an option to convert into the ordinary shares of the company or its subsidiaries. |
| Location of project and description of site |
| The project is located at Ulaanbaatar, Mongolia. |
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| Anticipated development impact of the project |
The project is expected to create a positive development impact based on:
- creation of permanent direct full-time jobs for over 500 people per each year and additional over 1,000 indirect job through the contractors and subcontractors over the next 3 years during the project implementation stage;
- transfer of technology and best industry practices from the multinational companies to the local enterprises through MCS Group’s various joint venture projects,
- improvement of the capital structure and financial viability of one of the Mongolia’s leading private enterprises, which will generate long-term financial benefits to its financiers, government and direct and indirect employees, and
- diversification of the Mongolian market and strengthening its domestic economy, which will help to reduce the reliance of the Mongolian’s economy on few mineral commodities. |
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| IFC's expected development contribution |
IFC’s key roles and expected contributions include the following:
- IFC will help the company to achieve a more sustainable capital structure by providing a long-term debt financing for the Project, which is not available in Mongolia. The proposed tenor of the IFC loans will be over average 4 - 5 years longer than those currently available to the company from local commercial banks;
- IFC’s participation as a quasi-equity investor in a private enterprise in the frontier country will provide an important signal to other potential international investors, and hence, stimulate interest in the private placement or IPO, currently planned within next 2-3. Based on IFC’s extensive experience, IFC will provide necessary assistance to MCS Group during such private placement and IPO process;
- IFC will introduce international standards and practices in corporate governance, environmental, social, safety & health management, financial and accounting management, and human resources policy, which will enhance MCS Group’s sustainability over the long term;
- IFC, at request from the company, is currently exploring sustainable options to improve domestic supply chain of the company, particularly for the MCS Group’s cashmere business unit given the vast importance of the cashmere industry to the Mongolian economy; and
- IFC intends to work with the company to develop the concept of its local hospital project by sharing IFC’s global knowledge, experience and network in the sector. |
| Environmental and social issues - Category B |
Based on a preliminary review of project information, IFC identified potential environmental, social, health and safety risk in the following areas: environmental health and safety management systems within each sector of business operations as well as at the holding company level. Within specific property development, construction, manufacturing and food and beverage processing operations, potential risks are associated with:
- labor relations and workplace health and safety;
- air and dust emissions;
- liquid waste treatment and disposal;
- solid waste handling and disposal;
- transportation operations;
- life and fire safety of public buildings;
- sustainable water supply; and
- the management of impacts on biodiversity and natural resources related to wool processing operations.
The entire MCS Group adheres to vision that promotes responsible environmental, health and safety (EHS) management to minimize potentially adverse social and environmental impacts of its operations. The MCS Group’s core business units targeted for this review maintain integrated systems to manage environmental, health and safety (EHS) performance commensurate with the level of risk associated with their operations. These systems incorporate, or are consistent with ISO standards of quality management and continuous improvement. |
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| For inquiries about the project, contact: |
Mr. Gankhuyag, Chief Financial Officer
MCS Plaza, Seoul Street-4
Mongolia
Telephone: 976-11-312625
Website: http://www.mcs.mn
The environmental documents will be made available at the following location:
Lobby of MCS Plaza,
Seoul Street-4, Ulaanbaatar-210644,
Ulaanbaatar, Mongolia |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
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