November 30, 2011, Kyiv, Ukraine: IBcontacts company has successfully closed a five-year Buyer’s Credit export finance deal for one of the leading confectionery factories in Ukraine, ALC “ZhL”. IBcontacts was in charge of structuring the project, preparing analytical documentation (financial, marketing and legal analysis of the borrowing company business activity/project) and providing legal advise.

This deal was nominated for the Deal of the Year 2011 annual award by such magazines as TFR (Trade & Forfaiting Review, London), Global Trade Review (London), and Trade Finance Magazine (London).

The loan was granted by the international financing bank to “ZhL” in order to finance purchase of new confectionary production lines. The deal was insured by the Dutch state export credit agency (ECA) Atradius Dutch State Business NV.

The deal appears to be a challenging one in the current Ukrainian economic and political circumstances (grade 7 according to OECD country risk classification) as attracting direct export financing from foreign banks has been almost impossible for Ukrainian buyers. Previous to this deal direct buyer’s credit schemes were accessible only for huge industries and country leaders in Ukraine with sales over one billion. These companies have always been considered to be reliable borrowers, immune to the influence of the country risks. Other middle-size companies had to involve a local bank as a borrower on a L/C basis or simply obtain a loan in Ukrainian bank. That was very expensive as banks in Ukraine include quite a high margin and require a highly liquid collateral. Therefore, direct export finance is financially advantageous for Ukrainian borrowers as the effective loan rates are significantly lower, a pledge is not required and terms of financing are higher than local ones.

This helps buyers to develop their business activities and increase trade volume with foreign countries.

The deal closed by IBcontacts opens doors for numerous Ukrainian companies. It also shows that attraction of direct foreign financing for a Ukrainian corporate borrower with 100 million USD annual turnover is not only possible, but turns out to be a good and reliable alternative to standard means of financing by local banks.

“The main success of the present deal is that it has opened the market of international finance to Ukrainian companies that are not among top 100, including “ZhL” confectionary factory with an annual turnover of 100 million dollars. Our project, supported by the export financing market specialists from IBcontacts company, has become an important achievement for us and started a new stage in the development of our company”, the Managing Director of “ZhL” confectionary factory Mr. Yevgen Gamov said of the deal.

“This deal proves that deals of this kind are way more advantageous for Ukrainian companies than obtaining a loan from a Ukrainian financial institution, as the effective loan amount rate is significantly lower than the ones provided by Ukrainian banks, there is no need in the pledge and terms are more acceptable for Ukrainian borrowers. The realization of such investing projects is strategically important for national companies as it helps to increase production capacities of the company and its competitiveness in the long-term prospects”, the Managing Director of IBcontacts company Ms. Kateryna Barabash  said of the deal.

This was also confirmed by the respective representatives of Atradius and Rabobank. During the Second International Seminar on Trade and Project Finance, organized by IBcontacts with the support of the Ministry of Economic Development and Trade of Ukraine and the Embassy of the Kingdom of the Netherlands on November 8, 2011 in Kyiv, Ukraine, the deal was presented to the Ukrainian business audience as a part of the case-study session. This Seminar became an outstanding event for the external trade relations of Ukraine as both one of the world biggest ECAs and an influential financing bank confirmed their readiness to expand cooperation with Ukrainian commercial and industrial importing companies. The representatives of Atradius and Rabobank shared information about the successful application of key aspects of international financing instruments, and, as a result, effectivlly closing trade deals between Ukrainian companies and their foreign partners. ZhL deal is evidence of such successful international trade cooperation.

“The main criteria that made the deal possible were the transparency of the borrowing company, well-structured corporate organization of the business, an excellent credit history and correspondence of the loan amount to borrower’s turnover”, Mr. Han Bartelds, vice-president of Rabobank summarized.

During the structuring of the deal between “ZhL” and Rabobank the experts of the IBcontacts company gave special emphasis to the legal appraisal. «On this stage we faced many challenging aspects, including the consideration of all legislative intents regarding credit agreements, conducted between the Ukrainian residents and their foreign partners and its registration in the National Bank. But this experience helped us to develop an efficient mechanism for the conclusion of such agreements. It will allow us to close similar deals for Ukrainian companies in a shorter period of time”, underlined Mr. Oleg Dorofeev, the Head of Legal Department of IBcontacts company .

The deal also is highly supported by Zhytomyr City Council because of its positive impact on further development of the region: “The question of production facilities renewal at Ukrainian factories is critical due to the fact that the level of their depreciation is high, because some factories haven’t been upgraded since the Soviet times, and many enterprises are technically backward. Thus, investment in production is an important factor for our country. The agreement on attracting direct long-term financing for the purposes of upgrading ZhL factory production facilities, affected the overall quality of national exported products.

That is why we support this agreement and believe that it was of great importance both for the Zhytomyr region and for the entire Ukraine”, confirmed Mr. Deboy, Zhytomyr City Mayor.

Another important factor is that the deal significantly influenced the strategic development of ZhL ALC, since the purchase of new confectionery equipment will increase the company’s production capacities. In addition, this deal opened the new possibilities for the company that is now going to build one more factory supplied with imported confectionary equipment. This project will be implemented by IBcontacts in 2012 by using a structured export finance tool (with project finance features).

ZhL confectionary factory is one of the top five leaders in Ukraine’s confectionery market. There are eight workshops functioning at the factory that produce all groups of confectionery products; the product range includes more than 250 items. Zhl products are exported to Germany, the US, Israel, Russia, Moldova, Estonia, Latvia, Azerbaijan, and other countries.

IBcontacts company specializes in developing trade relations between Ukrainian companies and their foreign partners. The company works in the fields of export, project and structured finance, credit management and trade facilitation, providing full range of financial, market research and legal services.

Atradius is one of the world’s leading credit insurers, with total income of more than EUR 1.5 billion. Atradius insures trade receivables against non-payment and offers a wide range of credit management products and services, varying from tailor made credit insurance and global solutions, to international debt collection and online services.

Rabobank Group is an international financial services provider. It offers banking, asset management, leasing, insurance and real estate services. Rabobank International has activities in the Netherlands, Europe, North and South America, Australia/New Zealand and Asia. It has a worldwide office network, with branches in 30 countries.