EBRD in $60 million long-term loan to Monetka, a leading Russian regional food retailer

CBonds News
April 11, 2008

Syndication gives group first access to international capital markets

The European Bank for Reconstruction and Development is providing a $ 60 million long-term loan to the Monetka group, a leading Russian regional food retailer targeting low to medium income households, to fund the expansion of its discount stores and supermarkets in regional centres and small towns in the Urals and neighbouring Volga region. The syndication of part of this loan will give the group its first access to international capital markets.

The EBRD will be the lender of record for the full loan amount of $ 60 million. The loan consists of a seven-year A Loan of $ 20 million for EBRD’s own account while the remaining $ 40 million has been syndicated to BNP Paribas (Cyprus), Raiffeisen Zentralbank Oesterreich AG and Cordiant as a B loan. The pricing of the B loan is 295 Basis Points over LIBOR and it has a six-year maturity.

The Urals and Volga regions represent almost a third of the total Russian market and include areas where modern retail is still either very fragmented or non-existent. Monetka’s strategy is to target these neglected areas as the biggest expansion opportunities rather than big cities such as Moscow and St. Petersburg, which are rapidly approaching saturation. Between them, the two cities already account for 45 percent of the market for modern format stores.

The retail sector is one of the largest and fastest growing segments of the Russian economy. Fuelled by an economic upsurge and a consumer boom, it accounts for about a third of the country’s GDP. It is expected to become the second largest in Europe after France in 2011, surpassing the UK and German markets in value. Russians on average spend 23 percent of their personal expenditures on food, but the market is highly fragmented.

This EBRD loan will enable Monetka to sell affordable food, over 80 percent of which is locally sourced, in a modern retailing format in the smaller cities and towns of the Urals and regions further to the East, said Gilles Mettetal, the EBRD’s Director for Agribusiness. Via cooperation with a truly local retailer the Bank will promote local production and improve diversity, food quality and hygienic standards and price competitiveness through development of modern retail, in particular in the Urals region of Russia, Mr. Mettetal added.

The loan proceeds will be used principally to fund the Monetka’s investment programme, helping it to grow in the Khanti-Mansyisk Autonomous District, Tyumen, Surgut, Yekaterinburg, the Republic of Bashkortostan and Perm region, as well as to restructure its balance sheet by refinancing some of its existing debt.The Monetka network consisted of 120 discount stores and 15 supermarkets at the end of 2007. Founded in 1993, the chain employs nearly 5,500 people. To date the EBRD has committed over €1 billion in more than 40 projects (with a total project value of over €3 billion) to assist the agribusiness sector in Russia.