First in class for SocGen

Early in 2006, Spanish consortium Educanos Marcor Comex – formed by Marcor

Comex and Educanos – approached the Société Générale (SG) Group to find a financing solution for its project in the previously untapped market of Montenegro.

SG was the only banking group to have both strong expertise in Cesce procedure (the Spanish export credit agency) and to be present in Montenegro through its subsidiary Podgorica Banka.

SG acquired a majority holding in Podgoricka Banka from the state in October 2005.

In the event, SG brought in Cesce, offering comprehensive credit risk insurance cover, to arrange a €4mn loan for the country’s ministry of education to buy in software and hardware for the Montenegrin educational information system.

“The general context for the closing of this transaction was quite challenging, as the political climate in the region was uncertain: general elections in Montenegro in October and a referendum on sovereignty in the province earlier in the year that culminated in Montenegro’s independence a few weeks before the deal itself was signed,” says Agní¨s Tauty, director, Southeastern Europe, SG Export Finance.

“It was therefore not easy to appraise this new born sovereign risk for either SG or Cesce,” adds says Inigo Imedio-Serrano, director, SG Export Finance, in Madrid. “But the parties pulled together the first ever ECA deal in the newly independent country, opening the way for new financing opportunities in Montenegro.”

Montenegrin GDP growth accelerated 6.5% during 2006 on the back of rising tourism revenues (12% of GDP), high aluminium prices (50% of total export of goods) and sustained private consumption, says Ariel Emirian, SG country risk economist.

In the medium term the country will remain largely dependent on the evolution of the tourism sector and sensitive to fluctuations in aluminium prices, he says.


Deal information:

Borrower: Ministry of Finance, Montenegro

Amount: €4mn

Arranger: Société Générale

ECA: Cesce

Tenor: 7 years

Law firm: Karanovic & Nikolic Advokati (arranger)

Date signed: October 2006