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| DeltaBank |
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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 | 25371 |
| Company name | Delta Bank |
| Country | Ukraine |
| Sector | Finance & Insurance |
| Environmental category | C |
| Department | Global Financial Markets Group |
| Status | Dropped |
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| Date SPI disclosed | October 24, 2007 |
| Projected board date | November 26, 2007 |
| Previous Events | Approved: December 20, 2007 |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
| The proposed project includes a subordinated loan of up to $15 million for the Limited Liability Company “Commercial Bank “Delta” (DeltaBank or the Bank), which will qualify as tier II capital under the regulations of the National bank of Ukraine, to support the Bank’s capital structure and loan growth. In addition, IFC will provide a partial credit guarantee of up to $25 million to support the issuance of a Ukrainian Hryvnia denominated bond by DeltaBank. The partial credit guarantee will help to improve the terms upon which DeltaBank can issue its bond, potentially increasing the amount, improving the price and/or extending the tenor. |
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| Project sponsor and major shareholders of project company |
| The project sponsor is DeltaBank. Delta Bank was created in February 2006 to provide banking services, mainly in the form of consumer finance to individuals. DeltaBank has partnered with the largest Ukrainian retail chains in order to provide financing to individuals at points of sale. The Bank’s sole shareholder is Mr. Nikolai Lagun, a successful Ukrainian banker and businessman, who was one of the former shareholders of Ukrsotsbank, Ukraine’s 4th largest bank. As of June 30, 2007, Delta Bank was the 40th largest bank in Ukraine with approximately $400 million in assets and $72 million in total equity, and the 1st largest in terms of consumer lending with an approximate 20%-25% market share. |
| Total project cost and amount and nature of IFC's investment |
| The total project cost is up to $40 million. IFC will provide a subordinated loan of up to $15 million and a partial credit guarantee of up to $25 million equivalent. |
| Location of project and description of site |
| DeltaBank is headquartered in Kyiv, Ukraine. The Bank has 29 regional offices as well as representation of approximately 3,000 points of sale throughout all of Ukraine. |
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| Anticipated development impact of the project |
IFC’s investment in DeltaBank will support competition in the consumer finance industry in Ukraine. This market is at a nascent stage and spreads are currently high. IFC’s support for a locally-owned bank, which is the market leader focused on this segment, with a countrywide distribution network, will help foster competition and ultimately enable the Bank to offer better products and services to its clients.
In addition, IFC’s partial credit guarantee will help to deepen the local currency corporate bond market in Ukraine. The current corporate bond market remains small by international standards and the local investor base is thin. A Ukrainian Hryvnia bond issued by DeltaBank with a credit enhancement from IFC will help to mobilize private sources of financing and attract a broader range of domestic and international investors to DeltaBank.
IFC involvement with DeltaBank will also help attract a strategic investor, as and when the shareholder decides to sell the Bank. |
| IFC's expected development contribution |
IFC is expected to contribute significantly to the development of the Bank’s operations through:
- mobilizing private capital to invest in DeltaBank’s local currency bonds.
- helping to extend the price, tenor and maturity of DeltaBank’s local currency bonds, thereby deepening the local capital market.
- allowing the bank to further leverage with additional senior debt to meet demand for its loan products by providing a subordinated loan designed to support the bank’s capital structure. |
| Environmental and social issues - Category C |
| This Bank is engaged in the business of consumer finance and has been classified as a Category C project according to IFC’s Environmental and Social Review Procedure. No further review is required. The Bank is required to inform IFC in the event of any change in business that could affect the social and environmental risks of the portfolio and commit to meeting any requirements that may arise with such a change. |
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| For inquiries about the project, contact: |
Vitaly Masyura, Deputy Chairman of the Board of Directors
Head of Treasury
36-B Schorsa Street
Delta Bank
Kyiv, Ukraine
Telephone: +38-044-391-5103
Fax: +38-044-391-5111 |
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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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