Lojas III

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	26329
Company name	Lojas Americanas S.A.
Country	Brazil
Sector	Wholesale and Retail Trade
Environmental category	B
Department	Global Manufacturing & Services
Status	Dropped

Date SPI disclosed	June 16, 2009
Projected board date	July 20, 2009

View Environmental & Social Review Summary (ESRS), click here

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

Lojas Americanas S.A. (“LASA” or the “Company”) is traditional retailing company in Brazil. Founded in 1929, the Company has a network of 469 physical stores, 3 distribution centers and is the leading multi-channel retailer (including brick-and-mortar stores, internet-based sales, TV sales, catalogue sales, telephone sales, kiosks and financial products retailing) in the country. LASA employs over 12,500 people in 23 Brazilian states, selling over 60,000 products which are purchased from over 4,000 suppliers.

The Company is undertaking a corporate expenditure and debt refinancing plan totaling $530 million during FY09-FY12 (the “Project”). Of this, around $180 million (34%) is capital expenditure planned to establish around 165 new stores across the country, and to upgrade several existing stores. Around 40 of these new stores will be established in the North and Northeast Brazil regions. Debt refinancing of about $350 million is needed to replace short and medium term loans assumed to finance its operations as well as its acquisitions in the recent past.

Anticipated development impact of the project

Expansion of LASA’s stores will, in turn, help the expansion of business for its small and medium scale (“SME”) suppliers. At present, over 70% of LASA’s sourcing is from such SME suppliers. The Project will also support LASA’s plans to grow into: (i) the frontier areas of Brazil, including the North and Northeast regions of Brazil (the poorest regions of the country), where in addition to providing otherwise scarce employment options, it will help in modernizing retail trade, and provide lower priced products; and (ii) second-tier cities of the larger states, where modern retail operations are not as well-developed. Finally, the Project will also enable LASA to strengthen its balance sheet, better matching its debt service payments with its projected cash flows.

IFC's expected development contribution

IFC will syndicate up to $150 million of B loans to meet the Company’s financing requirements. IFC’s A loan will be a long-tenor loan in local currency. IFC will also assist the Company in reducing the environmental and social footprint of its retail operations.

Environmental and social issues - Category B

LASA has adopted a policy to be a Green Company and to this end has established an environmental management structure. In order to enhance sustainability, LASA defined global targets for 2008 energy use and water consumption, waste generation and office supply use. In 2008 the Company has also intensified its efforts to spread out its recycling policy to some of its retail shops and all distribution centers. In 2007 the Company launched the “Companhia Verde” or “Green Company” program, focusing the sustainable consumption of natural resources and environmental awareness within the corporation. The “Companhia Verde” committee is composed by LASA’ main executives in the areas of Human Resources, Investors Relations, Finance, Sales, Engineering, IT, Logistics, Retail (Stores and Distribution Centers) and has five focus areas: water consumption, energy optimization, paper/office supplies use reduction, solid waste mitigation and education/communication. The action plans for each area are discussed by “Companhia Verde” committee and then implemented directly by a team leader for each respective area, with implementation supported through an environmental management system (the “SGA” from the Portuguese – Sistema de Gerenciamento Ambiental). This program was first implemented at Company Headquarters and among regional store managers, and it will be subsequently expanded throughout the Company. SGA implementation is steered by workgroups composed by Company’s executives. These groups use the methodology PDCA (Plan - Do - Check - Act), have developed action plans to reduce water, energy, paper and supplies consumption and monitor and evaluate results according to pre-agreed indicators.

LASA has a workforce of over 12,500 employees supplemented by outsourced contract employees, hired for tasks not related with LASA’s core business such as safety, cleaning and maintenance. The Company does have a Human Resources (HR) policy and manages labor issues through a HR department, in Rio de Janeiro. The Company’s HR practices are compliant with Brazilian law and with IFC’s requirements of Performance Standard 2.

The Company has formal fire and safety procedures and will incorporate them in ESMS and in training programs to reach a larger number of employees. The Emergency plans are based on preventive Planning, appropriate protective facilities and Staff training. LASA has policies related to fire prevention, emergency training, planning, emergency response and other store-level procedures, and it has trained fire brigade in each store. LASA has a dedicated Fire Safety department composed of 10 engineers and technicians located in Rio. The team travels around Brazil (stores and distribution centers) to evaluate compliance with the local Brazilian law and LASA’s procedures. The Company is audited periodically by local authorities as well as in the occasion of expansions and opening of new stores. The Life and Fire Safety procedure is part of LASA’s recently-launched SGA.

LASA has a department dedicated exclusively to Occupational Health and Safety related issues, which covers the entire national territory, acting preventively, through inspections, reviews, reports and plans for corrective actions. Within the context of its Green Company initiative, LASA has developed programs for energy, water and paper use management and separate wastes to facilitate recycling. Each of these four initiatives has a champion on the Green Committee, and the Company has studied actions developed and monitoring systems to confirm progress.

IFC PROJECTS

RECENTLY DISCLOSED