CASE

Loan attraction

Founder of Soul Partners has organized loan attraction from the EBRD for Ukrainian postal and logistics operator
The European Bank for Reconstruction and Development (EBRD) has granted $10m loan facility to leading Ukrainian postal and logistics services provider. EBRD financing has helped the company to increase its market share and expand its network. But before this result was achieved, there was a long negotiations process with EBRD. Investment advisers supported the company all the way from the initiation till transaction documents signing and loan disbursement.
Igor Verhogliad
Managing Partner
Postal network development financing was aimed at infrastructure expansion and renewal of equipment that would reduce emissions to the atmosphere.
The attraction of debt from EBRD is possible only if the business meets the required criteria. In course of negotiations the company changes, the level of corporate governance increases. Not every Ukrainian business is ready for such challenge. But if EBRD becomes the creditor, it testifies that the company has transparent business model.

What are the benefits of obtaining a loan from EBRD?

First of all, a properly structured investment project makes it possible to obtain lower effective interest rate than market rates, and for a longer period. EBRD usually provides loans with an interest rate close to the lowest market rate. For example, if market rate for loan in USD is in the range 5-9%, EBRD rate is likely to be 5-5.5%. However, this rate could be further reduced. In our case with logistics operator, part of the loan in the amount of $1.8m, was granted under the Green Logistics Program (GLP), which aims to implement the best practices in reducing carbon and counteraction energy inefficiency. For participants of such affiliate program interest rate for the abovementioned part of loan was 1-1.5%.
    Key stages
    1
    Preparation
    The process is often initiated by investment advisers - they recommend the client to attract financing from EBRD in case it is necessary for business development. This stage includes preparation of the investment case and audit execution. Subsequent steps in the process include the Company's management involvement, financial model preparation and formalization of the necessary documents package for Due Diligence.
    2
    Preliminary negotiations
    The next step is the preparation of the investment case and its presentation to EBRD. Negotiations with the bank's representatives continues at this stage. EBRD representatives can visit the company and hold additional meetings with management or the business owner. The result of this stage is obtaining basic financing terms and "road map" of the project.
    3
    Due Dilligence
    EBRD conducts its own Due Diligence process. Following Due Diligence, the terms of financing are drafted, which have to be approved by the credit committee. Each of these processes is accompanied by negotiations and inquiries between investment advisers and EBRD representatives.
    4
    Transaction preparation and signing
    The final stage is the preparation of transaction documents (loan agreement, pledge agreement, surety agreements, guarantees, etc.). The agreement is approved by EBRD Board. After that, Parties implement the arrangements set in the contract.
    Results

    Preparatory stage and negotiations with EBRD lasted more than a year. In early 2017, the company has signed a contract to raise up to $10m loan facility from EBRD to realise preagreed development program. And in a few months the company was able to get the first disburcement under the agreed tranche disbursement schedule.
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