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The European Bank for Reconstruction and Development (EBRD) and a syndicate of international banks have signed a loan agreement with a Russian subsidiary of Nokian Tyres group, Finland. The nine-year loan facility of €
50mn will be used to finance the construction of a new plant that is due to manufacture initially 1.5mn tyres a year for the Russian market.

Four commercial banks are participating in the syndicate, taking €
6.25mn each under an EBRD A/B-loan structure where EBRD remains the lender of record.

The syndicate includes Calyon Bank’s Helsinki branch, Danske Bank and HSH Nordbank of Denmark, and RZB of Austria. Calyon is the corporate and investment banking arm of France’s Credit Agricole group.

This deal marks a change of strategy by yet another leading international player which until now only exported finished products to Russia, but which has now decided to set up local production facilities to serve this growing market more efficiently, says Victor Pastor, director of EBRD’s Russia team.

The loan to Nokian Tyres, which is controlled by the largest tyre manufacturer in the Nordic region, Nokian Tyres plc, will finance the construction, equipping and operation of a plant to be built at Vsevolozhsk near St Petersburg. Production is due to start in 2006.

Nokian Tyres is a leader in the market for winter tyres, the demand for which is growing in Russia due to the extreme climate and state of the roads.
Russia’s tyre market is expected to grow by average 10-15% a year in the short to medium term, keeping track with the high growth rate both for domestically manufactured cars and imported foreign ones. Passenger car tyres represent just over half the market.