The EBRD has arranged the first international loan syndication for a Belarussian borrower in a transaction that will provide US$36mn to Priorbank, Belarus’s largest private bank. The loan will enable Priorbank to provide urgently needed short and medium-term loans to the private sector in Belarus.

The loan is in line with a strategy the EBRD adopted last year under which it is restricting its investments in Belarus to the private sector, and in particular to those activities that promote small and medium-sized enterprises (SMEs). The EBRD encourages the Belarussian authorities to enact the economic and political reforms that would enable the bank to do more business in the country. The bank will review its Belarus strategy next year.

The Priorbank loan will enable the bank to on-lend to private SMEs across Belarus. The EBRD is lender of record for the full amount and is providing a three-year loan using US$12mn of its own funds. The remaining US$24mn has been syndicated to six international commercial banks which are advancing one-year loans, renewable for a further year. The syndicated portion of the loan was in the last few weeks increased from its original target of US$20mn after it was oversubscribed by banks from Austria, Germany, Portugal and Russia.

Russia’s Bank for Foreign Trade (Vneshtorgbank), Portugals Caixa Geral de Depsitos, and Germany’s DZ Bank AG and HVB Group are acting as co-arrangers, taking US$4.75mn each. Germany’s Commerzbank (Eurasija) SAO, acting as a lead manager, is taking US$3mn, and Austria’s Raiffeisen Zentralbank Österreich (RZB) is taking US$2mn as manager.

In late 2002, RZB acquired a majority stake in Priorbank, becoming the first international strategic investor in the Belarussian banking market. The EBRD has been a shareholder in Priorbank since 1997 and has been instrumental in transforming it from a state-controlled bank to the largest privately held one in the country. The EBRD holds a 13.5% stake.

Priorbank also participates in two key EBRD financing programmes. It is one of the banks through which funds provided under the EBRD’s Belarus SME Credit Line are channeled for on-lending to Belarussian SME and micro clients; and it takes part in the Trade Facilitation Programme under which the EBRD guarantees up to 100% of the political and commercial risk of trade-finance instruments, such as letters of credit and payment guarantees issued by Priorbank to foreign confirming banks.