EBRD Financing for Rural Communication Infrastructure Tokyo

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EBRD Financing for Rural Communication
Infrastructure Tokyo
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August 2004
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What is the EBRD
The EBRD

• The European Bank for Reconstruction
• and Development (EBRD)
• AAA-rated multilateral institution founded in
  1991
• Playing a leading role in Central Eastern
  Europe (CEE) and the former Soviet Union (CIS)
• The largest lender and private equity investor in
  this Region
• Business oriented - working closely with private
  sector clients on commercial transactions

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1. A Major, Deal-Oriented Institution

• EBRD had approximately 16 billion of
  outstanding assets in the CEE and CIS Region as
  at 31 Dec 2003
• In 2003, the EBRD
• arranged 119 debt and equity transactions,
  committing
• 3.7 billion for its own account
• 75 debt transactions, 25 equity transactions
• making it the most active financial
  institution in this Region

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The EBRD
2. Regional Focus a network of offices in
27 countries
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3. Taking risk and a long-term view
The EBRD

• Appetite for political and commercial risks in
  CEE/ CIS countries
• Long-term perspective on investment
• debt non recourse/ limited recourse with
  maturities of 7 - 10 years in
  the telecoms sector
• equity no specific time constraint for exit,
  3-7 years preferred anchor investor reducing
  market volatility
• A catalyst for third party investment EBRDs
  commitments of 22.7 billion through to December
  2003 helped raise 68.5 billion in total
  investment

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4. Large Regionally-Focused Portfolio

The EBRD

• Investments exclusively in Central/Eastern Europe
  and the CIS
• 100 transactions per annum
• New investments 3.5 billion per annum
• Assets growth 2 - 2.5 billion per annum

Assets in the portfolio 15.6 billion
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Telecoms, Informatics and Media Team
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Where are we at the EBRD?
EBRD
Banking
Finance and Treasury
Legal, Economics, Support Units
Sector Business Groups
Country Business Groups

• Telecoms, Informatics Media
• Key sector for the EBRD (8 of all assets low
  impairment)
• Dedicated team of 18 professionals
• Works closely with Country Teams

Infrastructure
Central Europe
Financial Institutions
Russia and Central Asia
Energy and Telecommunications
SE Europe and Caucasus
Telecoms, Informatics Media
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Team Portfolio
Telecoms Team

• Cumulative portfolio 1.9 billion
• Covers 22 CEE/CIS countries
• Deal size 1 - 100 million
• Maximum EBRD transaction size 250 million
• Asset growth 200 million per annum

Media/Other25
Mobile30
Fixed line/Integrated 45
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Execution
Telecoms Team

• Execution driven by client objectives and market
  timetable
• Transactions have been negotiated, structured,
  documented and signed in 2 - 3 months
• Extensive in-house legal expertise in telecoms
  regulation and structuring in CEE/ CIS countries

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Debt Products (1)
Telecoms Team

• Debt instruments
• maturities up to 7 - 10 years
• stand-alone loans / syndicated loans / guarantees
• limited recourse / non-recourse structured debt
• capital expenditure financing / acquisition debt
  / balance sheet financing
• senior / subordinated
• fixed / floating rate
• denominated in major currencies or certain local
  currencies

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Debt Products (2)
Telecoms Team

• EBRD loans are
• not subject to restrictions on conversion of
  local currency or transfer of foreign
  currency
• not included in any general rescheduling of
  the countrys foreign currency debt
• generally exempt from country provisioning
  requirements
• exempt from withholding tax on interest

• EBRDs Preferred Creditor Status
• EBRD has Preferred Creditor Status in respect of
  transfer and convertibility risk (Art. 21 of the
  Agreement establishing the EBRD)
• Tested ! Russia, August 1998 - Payments to EBRD
  exempted from the transfer and convertibility
  moratoria

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Debt Products (3)
Telecoms Team

• EBRD A/B Loan Structure
• EBRD acts as a lender of record for the entire
  syndicated facility
• EBRD retains at least 35 of the loan for own
  account
• EBRD receives payments and passes them on to
  syndicate participants
• Participants benefit from EBRD Preferred Creditor
  Status

Loan Participants
Participation Agreement
EBRD
Loan Agreement
Borrower
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Equity and Other Products
Telecoms Team

• Range of applications
• large greenfield or existing expanding companies
• privatisations and pre-privatisations
• ownership changes/ rationalisation

• Equity
• private equity
• IPO underwriting and IPO investments
• Quasi Equity
• subordinated debt
• convertible instruments
• Guarantees
• political risk mitigation
• credit enhancement

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Direct Investment Facility

• aimed at smaller businesses in early-stage
  transition countries
• equity (and limited debt)
• local equity participation strongly preferred
• do not need hard-currency earnings
• sponsors expected to make reasonable cash
  contributions but may also include capital
  in-kind
• generally USD500,000 to USD2,500,000
• equity in range 25-30 - but up to 49 in short
  term
• preferred investment span is 3-5 years - but up
  to 7 years

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Micro and Small Business Loan Programme

• aimed at individual entrepreneurs and small
  enterprises
• strong regional focus - limited to specific
  countries
• EBRD works through existing local banks and by
  setting up greenfield specialised micro-finance
  banks
• assistance to develop staff and implement
  training
• 185,000 loans disbursing USD1.5 billion - so far!
• terms vary from scheme to scheme but typically
• small loans up to USD200,000 - maturity of up to
  3 years
• micro-credits from USD50 - USD10,000 - up to 12
  months
• delivers quickly!

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Rural Communication Infrastructure
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Current Team Portfolio - Regional
Telecoms Team

• Current Portfolio - 1 billion
• Russia 90 million
• Central Asia 63 million
• Including
• mobile telecoms
• fixed line operators
• ISPs
• submarine cables
• terrestrial TV
• cable TV
• software developers
• systems integrators

Central Asia7
Russia 32
Regional 6
SEEC 32
CEE 45
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EBRD Financing (1)

• Sound Banking Principles
• Transition Impact
• Additionality

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EBRD Financing (2)

• EBRD funds up to
• 35 of total project costs for a greenfield
  project
• 35 of long-term capitalisation of an established
  corporate
• Usual minimum EBRD involvement is 5 million
• Minimum project size is 15 million
• Lower financing requirements are met by financial
  intermediaries funded by EBRD

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EBRD Financing (3)

• Mobilisation of financing
• Commercial financing
• Other IFIs
• Grants

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Telecoms Team Contacts
Izzet R. Güney Team Directortel 44 207 338
6565 e-mail GuneyI_at_ebrd.com
David Cooper Senior Banker tel [phone]
6831e-mail cooperd_at_ebrd.com
Team fax [phone]