BSTDB Business

_1

WITH

BSTDB

Business

BSTDB IN BRIEF

BSTDB IN ACTION

FAQS

CONTACT US

BSTDB FINANCIAL INTERMEDIARIES

DOING

_2

BSTDB IN BRIEF

The Black Sea Trade and Development Bank (BSTDB) wasestablished by the founding 11 member countries of the Black Sea Economic Cooperation (BSEC)1 - Albania Armenia Azerbaijan Bulgaria Georgia Greece Moldova Romania Russia Turkeyand Ukraine as a regional multilateral development bank and financial pillar of BSEC

The aim of the Bank is to accelerate development and promoteco-operation among its shareholder countries by providing a variety of financial products for projects and trade transactions and otherwise facilitating the efforts of the Member States to create stronger links among their economies

The BSTDB authorized capital is SDR 3 billion (appx USD 45 billion) The subscribed capital is SDR 2 billion

As an independent international financial institution the Bank raises additional resources in international capital markets to finance its activities

BSTDB enjoys Preferred Creditor Status in all its membercountries which means that it will normally not reschedule debt payments or participate in debt rescheduling agreements withrespect to its loans to or guaranteed by its member countries and the Bank will not reschedule its loans to private sector borrower where the borrowerrsquos inability or anticipated inability to service its debt is due to a general foreign exchange shortage in the borrowerrsquos country

1 The Black Sea Economic Cooperation was founded in June 1992 with the aim of developing comprehensive multilateral and bilateral economic cooperation in various fields and converting the region into a zone of peace stability and prosperity

01

The Bank supports sustainable development and regional integration by providing financial and technical assistance to eligible projects programs and trade transactions Although it does not seek to maximize profitability the Bank provides financing on terms that are competitive with those prevailingin the market and which allow the institution to cover its costs and to generate sufficient revenues to build reserves and surpluses Financing may be extended to operations originating in both the public and private sectors and in practice the Bank has selected as its main target market medium sized companies active in the region that are well managed dynamic and demonstrate potential for future growth The Bank is especially keen to work with such firms which additionally are involved in cross border activities export oriented involved in a sector requiring the transfer of technology and know-how in the region users of environ-mentally friendly processes and generators of new jobs

The sectoral focus differs from country to country according to the demands of local businesses as well as the priorities of authorities while also responding over time to the changing dynamics of each economy Indicatively the Bank concentrates region-wide on sectors that are driving forces of economic growth in member countries energy gas and oil transporta-tion manufacturing the financial sector construction and telecommunications

June 1994 BSEC member states signed Agreement Establishing the BSTDB 24 January 1997 Agreement Establishing BSTDB came into force1 June 1999 Start of OperationsDecember 1999 First Project Signed March 2004 Investment grade credit rating obtained from Moodyrsquos Investors Service - long term Baa2 and short term P2October 2006 Credit rating upgrade to Baa1 from Moodyrsquos Investors Service2 December 2007 Shareholders decided to triple the authorized capital to SDR 3 billion (appx USD 48 billion) and to double the Bankrsquos subscribed capital to SDR 2 billion

Key Facts about BSTDB

0302

Eligible Projects

The Bank only provides financing to operations taking place inmember countries although it may work with financiers and investors from outside the Black Sea Region The Bank gives priority to thoseoperations which best fulfill its dual mandate of supporting develop-ment and promoting regional cooperation

In this respect high priority project sectors includebull investments or joint ventures in one member country by one or more firms from anotherbull investments which receive funding from financial institutions of another member countrybull projects with upstream and downstream linkages that provide benefits to the economies of more than one member countrybull projects which bring indirect region-wide benefits for example the introduction of a new technology or best practice which may subsequently be applied region-wide

Corporate and Project Finance

BSTDB IN ACTION

Operationally the Bank has adopted a flexible strategy allowing prompt response to changes in economic and market conditions in its countries of operation The Bankrsquos activities are guided by the following principlesbull Consistency with sound banking principles and prudent banking practicesbull Transparency accountability and effective corporate governancebull Fair and rapid consideration of any business proposalbull Efficiency and flexibilitybull Focus on clientsrsquo needs

The State Administrationof Rail Transport of Ukraine ldquoUkrainian Railwaysrdquorenovation andmodernization programUSD 26 million syndicated loan

JSC Seventh Continent Russiaretail super -and hypermarkets networktechnological andnetwork upgrade USD 36 million corporate loan

0302

The Bankrsquos project and corporate financing can be extended to public or private promoters in support of projects in a variety of sectors with priority assigned to telecommunications manufacturing financial services transportation energy and natural resources tourism and agribusiness Eligible operations may include the construction of new productive capacities or the upgrade and modernisation of existing facilities as well as working capital refinancing and general corpo-rate purposes Financing of the restructuring of an enterprise or its privatization is possible as well

ANP UkrainePetroleum amp gas operator

Network expansion

USD 36 millionlimited recourse term loan

EUROTERM ArmeniaAgro-product producermodernization of production and packaging equipmentUSD 3 million5 year secured term loan

Amount of Financing

The Bank acts as a complementary source of financing contrib-uting only part of a projectrsquos cost For loans the contribution is normally up to 35 of the total project cost The Bank thus sup-plements funds from sponsors banks and other sources The Bankrsquos equity participation in a single company will not exceed 33 of the total equity capital of an enterprise The minimum amount of financing necessary for direct Bank involvement in an operation is USD 3 million and the maximum amount of financing which may be provided to a single obligor is USD 38 million In exceptional circumstances or if a sovereign guaran-tee is provided these limits may be breached

0504

GuaranteesThe Bank may assist borrowers to obtain fi-nance through the provision of guarantees

Fees and ExpensesIn line with commercial practice beneficiaries reimburse the Bank for administrative expenses incurred including travel and accommodation costs and technicalconsultancy legal feesA front-end fee may be charged at signature to cover these expenses Annual com-mitment fees on undisbursed loans may also be charged

Security and CovenantsThe Bank will generally require security for its loans This security may take the form of project assets (mortgages) assignment of earnings or other appropri-ate collateral In specific cases the Bank may require a sovereign guarantee

Balkan Accession Fundprivate equity fund for SME supportEquity investments in small and medium sized enterprises in Albania Bulgaria Moldova Romania and UkraineEuro 10 million

EquityThe Bank may make equity investments in a variety of forms depending on the invest-ment vehicles When the Bank takes an equity stake it requires an appropriate return on its investment and a clear exit strategy

LoansThe Bank provides a variety of loan types modified to meet an individual operationrsquos requirements A Interest RatesRates may be fixed or floatingB CurrenciesLoans may be denominated in any convertible currency or a combination of convertible currencies in which the Bank is able to fund itselfC TenorsProject loan maturities generally range from 3 to 10 years depending on theindividual operation while the availability term does not generally exceed two years

TELESET RussiaFixed-line telecom operator network expansion

USD 3 million equity investmentUSD 20 million loan

0504

Banca Romaneasca - KfW

SME financingEURO 5 million guarantee facilitycompleted in 2005

Metropolitan Municipalityof Istanbul

Expansion of the Metro Light transport system in Istanbul

USD 21 million 8 year loan

Operations through Financial Institutions

Trade FinancePromotion of regional trade by providing trade financing to exporting and importing firms in member countries primarily through local financial institutions is an important feature of the Bankrsquos operations BSTDB has developed a range of trade finance products which are designed to improve access to financing and thus competitiveness of local firms as well as to enhance the capacity of local financial institutions tofinance regional export and import transactionsTrade finance products currently provided include the following

bull Pre-Export Finance Facility bull Multiple Buyer Credit Facility bull Combined Trade Finance Facilitybull Single Buyer Credit Facilitybull SingleMultiple Supplier Refinancing Credit Facility bull Guarantee Facility

Direct operations with firms - Supplier Refinancing Credit and Buyer Credit products - are undertaken on a case-by-case basis Priority is given to transactions which improve regional exporting capacity and exceed USD 3 million

Trade Finance products are available through financial inter-mediaries in Armenia Azerbaijan Georgia Moldova Russia Turkey and Ukraine (see the annex)

Guarantees for trade transactionsThe Bank seeks to increase trade volume in the Black Sea Region by providing country risk and commercial risk cover on short-term trade finance instruments A Guarantee may apply to trade related payment instruments issued by selected banks andor export credit agencies within the region to benefit small and medium sized companies as well as large exporting companies

Maturities of trade finance credit lines range from 180 days to 5 years depending on the type of product Financing of up to 100 of the transaction value may be provided by the Bank

0706

Supporting MicroSmall and Medium-Sized EnterprisesThe Bankrsquos SME Strategy prioritises the identification and support of local micro small and medium-sized enterprises through financial intermediaries The Bank provides medium-term SME finance facilities to financial institutions in the member countries designed to provide medium-term financing to eligible local SMEs The following factors are also taken into consideration

bull Creation of new employmentbull Promotion of exportsbull Facilitation of knowledge and technology transferbull Promotion of intra-regional investmentbull Mobilisation of foreign capitalbull Facilitation of ldquonetworkingrdquo ie creating contacts between SMEs in the region

SME finance facilities are provided through financial interme-diaries in Armenia Azerbaijan Bulgaria Georgia Moldova Romania Russia Turkey and Ukraine (see the annex)

SME Leasing FacilitiesThe Bank supports leasing companies in member coun-tries by providing medium-term SME and trade finance facilities for financing eligible leases extended to micro small and medium-sized enterprise clients

SME leasing facilities are provided through financial intermediaries in Bulgaria and Georgia (see the annex)

Credit Lines for Mortgage FinancingThe Bank supports development of mortgage finance markets by extending medium and long-term credit lines to eligible finan-cial institutions in the member countries These funds are then on-lent to residents-clients of the local partner banks and are used to finance purchase repair or renovation of residential immov-able property

Credit lines for mortgage financ-ing are provided through finan-cial intermedies in Azerbaijan and Russia (see the annex)

Co-FinancingThe Bank places great emphasis on encouraging the involvement of other sources of financing in its operations thereby increas-ing the total resources available for financing in the regionThe Bankrsquos co-financingpartners includebull international financial institutionsbull export credit agenciesbull commercial banksbull official development finance institutions (bilateral donors)

0706

AVEA TurkeyMobile telecom operatorGSM-based network expansionUSD 18 million9 year loan

Total project costUSD 15 billionCofinanced withInternational Finance Corporation (World Bank Group)bilateral donorsDEG (Germany)FMO (Netherlands)PROPARCO (France)and commercial banks

Special FundsAmong the significant operational challenges for BSTDB is the leverage of its assets to maximise flows of capital and expertise into the region to improve access to information and to contribute to the develop-ment of greater managerial technical and financial capacity To meet these challenges the Bank has made provision for the establishment of Special Funds - which are trusts or other pools of financial resources

Typically these funds are established to provide financing for projects andor technical assistance to build capacity through skill transfers or enhanced information quality

The mobilization of special fundsbull increases the impact of donor activitiesbull provides an alternative route for raising fundsbull improves harmonization of procedures and consistency of approach among co-financiersco-donorsbull establishes working relationships with governments organizations and other entities which show an active interest in the Black Sea Regionbull provides the opportunity to attempt activities such as pilot projects and complex ventures and other undertakings with a high beneficial impact but low financial return

Currently the Bank is administering a Technical Cooperation Special Fund made available by the Government of the Hellenic Republic

Advantages of Working with the BankThe Bank seeks to play the role of stable and loyal financial partner providing its clients with a sustainable and long-term source of funding at competitive terms There are many advantages to working with the Bank

For Member Countriesbull Prioritised financing for regional projects with high development impactbull Facilitation of official and commercial co-financing for public sector projectsbull Improved institutional and regulatory environments through technical assistance programsbull Advisory services

For Enterprises and Sponsorsbull Medium-to-long term financing on attractive termsbull Financing instruments tailored to the needs of each projectbull Access to funding not readily available from commercial sourcesbull Improved prospects for mobilization of additional financial resourcesbull Enhanced credit standing for projectsbull Enhanced access to technical assistance for project preparation

For Commercial Financial Institutionsbull Assistance in developing a local client base and extending a regional presencebull Additional funding for on-lending to clients in the regionbull Risk sharing on projects and trade transactionsbull Access to international financial marketsbull Advisory services

For other International Financial Institutions and Export Credit Agenciesbull Co-financing and risk sharingbull Local expertisebull Introduction of prospective clients and opportunitiesbull Reduced project preparation costs

0908

Approaching BSTDBRequests for the Bankrsquos assistance may come from private companies and financial institutions as well as governmental public and non-profit entities The Bank does not distinguish between any categories of potential clients and evaluates each application on its merits

Initial ApproachInitial contacts may be established through the Bankrsquos wwwbstdborgBSTDBrsquos website also gives short descriptions of some projects that have been financed by the Bank and of the Trade Finance facilities avail-able Consultants interested in working with the Bank can also register through the website All inquiries for finance operations should be sent directly to BSTDB headquarters Although the Bank proactively manages inquiries and applications the quality and availability of information are key factors in the response times achieved The Bank ensures the confidentiality of all the information it receives

ApprovalAll projects undergo a thorough appraisal process after which they are presented to the Board of Directors Approval by the Board represents a formal commitment by the Bank

Technical AssistanceThe Bank may provide clients with access to grants or financing to assist in project preparation or development of necessary regulatory or institutional infrastructure Determination of eligibility is based on operational priorities and needs

Environmental ProceduresAs an integral component of its objectives the Bank has a mandate to promote environmental sustainability soundness and cleanertechnologies in a cost effective manner The Bank supports the various national regional and international efforts to prevent marine pollution in the Black Sea From the inauguration of its operations environmental considerations have been incorporated into the Bankrsquos policies andprocedures All projects submitted for approval to the Bankrsquos Board of Directors require consideration of key environmental issues Each proj-ect supported by BSTDB must comply with the environmental require-ments of the Bank and its environmental impact is appraised In certain instances the Bank may request sponsors of a project to commission independent experts to prepare reports on the environmental impact of a project In the year 2001 the Bank launched the financing of its first major environmental project in the manufacturing sector

Procurement ProceduresA set of rules and requirements for procurement of goods and services applies to each project to be supported by the Bank The Bankrsquos procure-ment policy is based on the principles of fair and open competition for suppliers of goods and services to the Bankrsquos supported operations BSTDB is committed to international competitive tendering of major contracts in the public sector without country restriction or impediment although in some cases a margin of preference may be applied to sup-pliers and contractors from member countries Contracts are awarded in a clearly defined and transparent manner

0908

FREQUENTLY ASKED QUESTIONS

Why should my company prefer BSTDBFour main reasons should make a company in the Black Sea Region prefer BSTDB speed of decision-making loan size competence of the staff and absence of a ldquopolitical agendardquo

Though BSTDB follows international standards in its proce-dures the Bank is smaller than other international financial institutions (IFIs) and thus able to respond more quickly to a business proposal While the approval of most projects takes around six months BSTDB has been able to process and ap-prove some financings in less than four months

A second reason is that BSTDB is flexible ie able to process projects especially in its smaller member countries under the 5 million USD limit applied by many other IFIs

The third reason to undertake an operation with BSTDB is the quality of its staff The project teams staffed by professionals with extensive banking experience blend international and local expertise and are closely involved with the Black Sea countries

Finally the Bank has no political agenda or macro- economic policy conditions attached to operations The Bank was created by the countries of the region to promote economic activity and regional cooperation

Is there any economic activity excluded from BSTDB financingBSTDB follows the general rules of International Financial Institutions in this respect In general and as a part of the negative list the Bank cannot finance projects that are environmentally harmful andor linked to the production of military equipment narcotics tobacco and products derived from hard alcohol (However BSTDB can finance theproduction of beer wines and other products with a moderate alcoholic content) BSTDBrsquos full Negative List of Products is available at wwwbstdborg

Is there any limit to the amount that BSTDB can lendThere are two main limitations in this regard BSTDB like other international financial institutions (IFIs) in principle does not finance more than 35 of the total project cost The Bank also has a loan ceiling for each individual project (the single obligor limit) which at present is approximately 38 million US dollars subject to periodic revision As far as the lower limit is concerned the BSTDB shows flexibility in meeting thedemands of its clients in the region many of them being small businesses Therefore the Bank may consider financing starting from a few million US dollars which is a lower limit than that offered by other IFIs Even smaller loans may be provided through cooperating financial intermediaries (local banks) in member countries

10

What is the approval procedure for BSTDB financingBSTDB follows internationally accepted standards in itsproject cycle After a project proposal is presented to the Bank and initially screened the concept is cleared by the Bankrsquos Credit Committee Then after appraisal and duediligence the Credit Committee undertakes Final Review and if approved sends the operation for final approval to the Board of Directors Once this approval is obtained the loan agreement can be signed followed by the disbursement of the loan The same approval procedure applies for credit lines to financial intermediaries

How long does it take from the project proposal to the signing of a loanBSTDB proceeds as quickly as possible depending on the quality of information obtained from the client the capacity of the client the complexity of the project itself and the risk involved In general the Bank aims for 3-6 months However the Bank will not proceed with financing until it is completely satisfied with all appropriate information and the legaldocumentation is fully verified

What is the pricing of a BSTDB loanThe pricing and the terms of a loan are subject to individual appraisal As with other institutions pricing of an operation depends upon the cost of funds a margin to cover costs and a risk margin As for fees and commissions the Bank normally requires a front - end fee and a commitment feeFollowing international practices BSTDB may also request other fees depending on circumstances such as an appraisal fee a syndication fee a management fee etc

What security does BSTDB requireA standard commercial security package including - but not limited to - a pledge of shares assets bank accounts etc is generally required while the Bank may also accept an offshore security For certain low risk transactions financing may be provided unsecured but this is an exception not a rule The Bank does not normally seek a sovereign guarantee For certain projects though - particularly where state ownedentities or official agencies are involved and the nature of the operation may generate economic benefits but not a direct financial return- such a guarantee may be required

11

1 Komninon str 54624 Thessaloniki Greece (+30 2310) 290400 (+30 2310) 221796 286590infobstdborg middot wwwbstdborg

Contact us

Financial Institutions IAlbania AzerbaijanBulgaria GeorgiaRomania Turkey +30 2310 290455bak_finbstdborg

Financial Institutions IIArmenia Greece Moldova Russia Ukraine +30 2310 290538bnb_fibstdborg

Energy amp Infrastructure +30 2310 290477bak_infbstdborg

General IndustriesTransport and Tourism IArmenia Greece Moldova Russia Ukraine +30 2310 290419bak_manbstdborg

General IndustriesTransport andTourism IIAlbania AzerbaijanBulgaria GeorgiaRomania Turkey +30 2310 290523bak_manbstdborg

Treasury +30 2310 290456fin_trebstdborg

External Relations ampCommunications tel +30 2310 290494 ercbstdborg

Banking teams

ArmeniaACBA BANKTrade FinanceSME FinancingwwwacbaamARMECONOMBANK - SME Financing+37410 53 88 00INECOBANK - Trade Financewwwinecobankam

AzerbaijanAZERDEMIRYOLBANKSME FinancingwwwazerdemiryolbankcomINTERNATIONAL BANK OF AZERBAIJAN Trade FinancewwwibarazMICRO FINANCE BANK OF AZERBAIJAN SME Financingwwwmfbaaz UNIBANK Trade FinanceSME FinancingwwwunibankazBANK RESPUBLICA - Trade FinancewwwbankrespublikaazBANK STANDARD - Trade FinancewwwbankstandardcomTECHNIKA BANK - Mortgage Financingwwwtexnikabankaz

BulgariaPROCREDIT BANK BULGARIASME FinancingwwwprocreditbankbgMKB UNIONBANK - SME FinancingwwwunionbankbgBM LEASING - SME Leasing+3592 942 99 11BULGARIAN AMERICAN CREDIT BANKSME Financingwwwbacbbg

GeorgiaPROCREDIT BANK - SME FinancingwwwmbgcomgeTBC Bank - Trade FinancewwwtbcbankgeCARTU BANK - Trade FinancewwwcartubankgeTBC LEASING - SME LeasingwwwtbcbankcomgeVTB BANK - Trade Financewwwugbge

MoldovaAGROINDBANK - SME FinancingwwwmaibmdBANCA SOCIALA - SME FinancingwwwsocbankmdPROCREDIT MOLDOVA SASME FinancingwwwmecmoldovacomMOBIASBANCATrade FinanceSME Financingwwwmobiasbankcom

RomaniaBANCA COMERCIALA CARPATICASME Financingwwwcapraticaro

RussiaCREDIT BANK OF MOSCOWSME FinancingwwwmkbruNBD BANK - SME FinancingwwwnbdbankruPROBUSINESSBANK - Trade FinancewwwprbbruURSA BANK - Mortgage Financingwwwursabankru ZAO EUROPLAN - SME FinancingwwwleasingruZENIT BANK - SME Financingwwwzenitru

TurkeyTURKEXIMBANK - Trade Financewwweximbankgovtr

UkraineFIRST UKRAINIAN INTERNATIONAL BANK Trade FinancewwwfuibcomPROCREDIT BANK UKRAINESME FinancingwwwmfbcomuaKREDITPROMBANK - Trade Financewwwkreditprombankcom

FinancialIntermediariesof BSTDB1

1 The list is valid as of end 2007 and may be updated from time to time For an updated list please check wwwbstdborg

ANNEX

_16