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| MDM Bank |
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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 | 25345 |
| Company name | MDM Bank |
| Country | Russian Federation |
| Sector | Finance & Insurance |
| Environmental category | FI |
| Department | Global Financial Markets Group |
| Status | Active |
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| Date SPI disclosed | February 9, 2007 |
| Projected board date | June 14, 2007 |
| Date revised SPI disclosed | May 29, 2007 |
| Previous Events | Invested: June 15, 2007
Signed: May 16, 2007
Approved: March 15, 2007 |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
This SPI is an update of the SPI dated February 9, 2007. The project is a financing package comprising a senior loan of up to $100 million, for supporting MDM Bank (MDM or the Bank) expansion of term lending to SMEs, particularly in the regions outside Moscow as well as to support the Bank’s growing mortgage portfolio, and an equity investment of about $184 million, increased from the equity investment of about $100 million envisaged in the previous SPI issued in February 2007. The equity investment is being processed under investment number 25982 for which board approval is expected to be sought in June 2007. The loan of $100 million was committed on May 16, 2007. IFC is also considering a trade line to the Bank of up to $35 million under the Global Trade Finance Program.
MDM is one of Russia’s leading private universal banks ranked amongst the top 11 in the country by asset size. MDM operates 122 outlets across Russia along with a network of 14 retail offices in Moscow. MDM Bank Group also includes securities trading and asset management companies, a leasing company and Latvian Trade Bank in Riga. |
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| Project sponsor and major shareholders of project company |
As of today MDM is a wholly-owned subsidiary of MDM Holding SE, an Austrian holding company. Until recently MDM Holding SE was beneficially owned 50% each by Messrs. Andrey Melnichenko and Sergey Popov, two Russian entrepreneurs.
In December 2006 MDM announced an agreement reached by its owners whereby Mr. Popov (who previously owned a 50% stake) will own a 90% share in the Bank and Martin Andersson (a founding partner of Brunswick Group and a former CEO and Chairman of UBS Brunswick Warburg investment bank), member of the Bank’s Strategy Committee, will acquire a 10% stake. As of the date of this Summary, the company, the ultimate beneficiary of which is Mr. Andrey Melnichenko, has transferred its 50% stake in MDM Holding SE to a company controlled by the beneficial interests of Messrs. Sergey Popov and Martin Andersson. |
| Total project cost and amount and nature of IFC's investment |
| The project consists of a financing package comprising a senior loan of up to $100 million, a $35 million Trade Finance line under the Global Trade Finance Program and an equity investment of about $184 million in MDM Bank. |
| Location of project and description of site |
| MDM Bank is headquartered in Moscow, and operates 122 outlets and 200 ATMs across Russia. |
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| Anticipated development impact of the project |
The project will:
- expand availability of residential mortgages, especially in the regions outside Moscow,
- make available much needed term funding to SMEs, particularly in the regions, and
- facilitate the emergence of a strong and well-governed bank as a model for the Russian banking industry. |
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| IFC's expected development contribution |
IFC’s role/contributions include:
- providing larger tem funding than is available in the market to MDM,
- support and strengthen MDM’s franchise through IFC’s associations,
- help strengthen MDM’s mortgage business through an IFC technical assistance program, and
- help MDM establish an environmental management system. |
| Environmental and social issues - Category FI |
This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.
During appraisal, IFC analyzed MDM’s portfolio, and the activities proposed to be supported with IFC financing for types of transactions, size, tenor and industry sectors and determined the Applicable Requirements based on an analysis of the potential social and environmental risks associated with MDM’s portfolio and considering IFC’s investment. The Applicable Requirements are:
- The IFC FI Exclusion List; and
- The applicable Russian Federation National Social and Environmental Laws and regulations.
- The IFC Performance Standards
IFC also reviewed MDM’s existing social & environmental procedures and capacity to implement the same.
Based on the Applicable Requirements and procedure and capacity review, MDM will be required to:
-Develop a Social & Environmental Management System (SEMS), or commit to an SEMS Plan detailing time bound actions/enhancements related to the establishment of an SEMS, prior to disbursement to the satisfaction of IFC.
- Identify responsible, qualified persons to manage and implement the SEMS.
- Commit to implement the SEMS, to ensure that its investments/activities supported by IFC financing are in compliance with the Applicable Requirements.
- Commit to take action to remedy any gaps in SEMS implementation on an ongoing basis.
- Submit a periodic report to IFC as per a format to be provided by IFC. |
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| For inquiries about the project, contact: |
Evgeny Tutkevich, Deputy Chairman of the Management Board
33 bld. 1, Kotelnicheskaya nab.
Moscow 115172, Russian Federation
Telephone: +7-495-795-8516
Fax: +7-495-797-9501 |
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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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