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| This Summary of Project Information 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. |
Summary of Project Information (SPI) |
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| Project number | 10748 |
| Project name | Croatia Banka Pre-Privatization Loan |
| Country | Croatia |
| Sector | Finance & Insurance |
| Department | Global Financial Markets Group |
| Company name | Croatia Banka d.d. |
| Environmental category | FI |
| Date SPI disclosed | May 29, 2001 |
| Projected board date | August 6, 2001 |
| Status | Completed |
| Previous Events | Invested: July 23, 2002
Signed: June 10, 2002
Approved: April 1, 2002 |
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| Project sponsor and major shareholders of project company |
When first established in 1990 the project company, Croatia Banka d.d. (CB or the bank) was the first private bank in Croatia. It had a very successful start and soon established a branch network, which covers all parts of Croatia. Today, the bank has 25 branches and 320 employees. In the late 1990s, CB experienced problems with its portfolio. In addition, the economic situation in Croatia deteriorated, and in September 1999, CB was taken over by the state, with all of the senior management replaced. The bank's non-performing loans were replaced with government bonds. The bank is currently wholly owned by the State Agency for Deposit Insurance and Bank Rehabilitation (Bank Rehabilitation Agency) and is scheduled to be privatized within the next year.
Compared to the five other banks taken over by the state, CB has much less staff and is efficiently organized. Its portfolio problems were severe but were mostly due to problems in few branches and the head office. Otherwise the CB has been functioning reasonably well. Therefore, CB's rehabilitation process was much shorter than that for the five other Croatian banks transferred to the Bank Rehabilitation Agency. |
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| Total project cost and proposed IFC investment |
| The project consists of an up to EUR 8 million (US$7.5 million equivalent) convertible pre-privatization loan to CB with a maturity of 8-10 years. At privatization, IFC will have an option to convert a part of its loan into shares of CB, for up to 10% of the bank's equity. If the bank is not privatized within two years, the loan will have to be repaid. |
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| Location of project and description of site |
| Croatia Banka is headquarterted in Zagreb and has 25 branches in Croatia. Investments can be made throughout the country. |
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| Description of company and purpose of project |
CB is a medium sized Croatian bank and most of its clients are local private small and medium sized enterprises (SMEs). It is one of the few banks in Croatia which has a countrywide branch network. IFC's loan will provide the bank with long-term funding, which CB needs to on-lend to SMEs prior to the privatization and to maintain its market share. SMEs are key to Croatia’s continued economic growth, yet their potential is not being realized due to scarcity of funding. This funding gap is still acute at present due to the shortage of alternative sources, such as leasing or factoring; and the preference of many banks for larger borrowers. CB is one of the few banks actively providing term finance in this sector, yet faces market demand in excess of its current funding resources. Further, CB’s lending activities extend to the regions, where access to financing is more limited than in Zagreb.
The investment will make the bank more attractive to a potential strategic investor and improve the chances for successful privatization. With committed strategic partners and strong local management, CB would be well-positioned to become a leading provider of term finance. IFC’s provision of additional term funding would extend the maturity of, further stabilize, and diversify CB’s funding base; while the associated financial covenants would help ensure the Bank maintains appropriate portfolio diversification and a prudent risk profile during their further expansion. This will improve CB’s market position and institutional strength. |
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| Environmental and social issues - Category FI |
This is a category FI Type 2 project according to IFC’s environmental and social review procedure. Croatia Banka will establish an environmental management system to ensure that subprojects comply with host country environmental and occupational health & safety requirements and applicable IFC safeguard policies and other requirements. Croatia Banka will appoint a senior officer with overall responsibility for environmental issues and a second person to act as Environmental Coordinator, and both persons will attend IFC’s environmental training course for financial intermediaries. Croatia Banka will submit a written description of its environmental management system for review and comment prior to first disbursement, and thereafter will submit environmental performance reports to IFC on an annual basis. Category A subprojects must be subject to prior review and approval by IFC.
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| To contact the project company, please write to: |
Ms. Vesna Sojat
Head International
Kvaternikov trg 9, HR - 10000 Zagreb
Croatia
Phone: 385-1-23 91 273
Fax: 385-1-23 91 169
E-mail: Vesna.Sojat@Crbanka.Tel.Hr |
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