The European Bank for Reconstruction and Development (EBRD) is participating in a US$3mn loan to Nola, a Georgian construction company, through its existing medium-sized co-financing facility with Georgia’s TBC Bank.
Nola, set up in 1998 by two brothers, Kakhaber and Besarion Khuchua, is a major player in Georgia’s fast-expanding construction sector, which is growing at about 30% a year. Leaving aside the business generated by construction of the international Baku-Tbilisi-Ceyhan regional energy pipelines through Georgia, Nola accounts for 11.3% of the Georgian market.
The EBRD will finance a US$3mn loan organised by TBC bank through a participation facility of US$1.5mn (non-recourse portion) and a further US$1.5mn loan to TBC Bank for on-lending to the company (full recourse portion). The loan, which will finance the purchase of land and equipment as well as permanent working capital, reflects the EBRD’s experience of, and confidence in, TBC Bank’s lending approaches, says Nikolay Hadjiysky, head of the EBRD’s Tbilisi office.
The EBRD’s co-financing facility with TBC was signed in June 2005 to ease access to medium and long-term funding for Georgian enterprises. As well as providing long-term funds to a leading local bank for on-lending, it enables the EBRD to participate in financing of projects – taking direct risk on Georgian enterprises by lending money alongside TBC. This allows borrowers to receive larger loans than local banks have the capacity to provide on their own.
The medium-sized co-financing facility is one of the instruments available under the EBRD’s Early Transition Countries (ETC) initiative, launched in 2004, which aims to stimulate market activity in the Bank’s seven lowest income countries of operation by offering more flexible lending instruments so as to finance more and smaller projects, mobilise more investment, and encourage economic reform. This finance instrument is also available in the Western Balkans.