The FINANCIAL — The European Bank for Reconstruction and Development is providing a 10-year subordinated loan of $15 million to strengthen the balance sheet of Joint Stock Bank “Transcapitalbank” (TCB), whose key focus is on servicing small and medium-sized businesses, especially in the regions of Russia.
The project is part of a broader EBRD anti-crisis support package for Russia’s banking system.
This unsecured loan will count towards TCB’s Tier II capital under Russian Central Bank regulations. The loan provides for bullet repayment on maturity. The transaction brings the EBRD’s total commitment to TCB to over $134 million. The EBRD has since 2006 been a major shareholder in TCB with a stake of 25 percent plus one voting share.
By providing equity-type support, the EBRD makes it possible for recipient banks to use their broadened capital base to increase the amount of debt they can raise from other lenders. The resulting leverage will thus multiply the effect of the EBRD’s anti-crisis funding.
The EBRD financing represents a vote of confidence in TCB’s management team, its business model and its transparent corporate governance. The Bank’s long-term funding will help TCB to continue financing its core client base made up of small and medium-sized businesses through the current turmoil.
TCB operates in 16 regions of Russia and is one of the market leaders in the regions of Perm, Syktyvkar and Ryazan. Moscow-based clients have traditionally generated less than half of its loan portfolio.
This is the second transaction aimed at strengthening the capital base of our banking clients since the crisis hit Russia, said Nick Tesseyman, the EBRD’s Business Group Director for Financial Institutions. These clients have shown their ability to weather the first phase of the crisis and this funding aims to help them retain clients and market share, he added.
In a situation where strong risk aversion continues to predominate, the role of the EBRD and other International Financial Institutions in demonstrating support to the banking system is vitally important. This is why the Bank, in addition to its normal lending programme, has put together an anti-crisis package for a sector whose good health is crucial for the whole Russian economy.
The roll-out of these projects will continue over the next few months. The package provides various funding solutions, ranging from equity or quasi equity participations to increasing the amount of Russian trade finance the EBRD is willing to guarantee in order to maintain a rapid and smooth flow of imports and exports.
The EBRD’s priority is to support the capital of existing banking clients, as well as provide finance for mergers and acquisitions to speed up the banking sector’s consolidation, a long-standing goal of the Bank.