Cantik Equity Investment

complete

The proposed project will finance the development, construction and operation of a nation-wide chain of up to 6 international standard specialist retail centres in Ukraine. The retail centres with a total leasable area of approximately 115,000 m2 will be anchored by the leading Ukrainian household goods retailer, Nova Linia. The sites for the project have been secured in Lvov, Simferopol, Dnipropetrovs, Donetsk, Borispol (Kiev region) and Bucha (Kiev region). The project transition impact will derive from the following key areas: (i) The project will support development of the first professional household goods chain in Ukraine introducing new property formats and promoting competition in the retail sector in secondary Ukrainian cities. (ii) The project will contribute to improvement of the market transparency and to attraction of foreign capital by sending a positive signal to other international investors considering similar projects in Ukraine. (iii) The Bank’s involvement will also assist in mobilising long-term debt funding for the project. Cantik Enterprises Ltd, a limited liability company registered in British Virgin Islands and established to invest in Ukrainian limited liability companies, each of which will hold an individual retail centre. The company is sponsored by Dragon Capital, one of the leading finance houses in Ukraine. Dragon Capital develops the project in partnership with East Capital, a major Scandinavian investment fund manager. Equity investment of USD 12.8 million representing 37.3% of the company’s shares. The other shareholders would be Dragon Capital and East Capital to hold 12.7% and 50.0% of shares respectively. The bank total exposure (USD 12.8 million) will be in the region of 16.2% of total project costs (USD 79.2 million). Dragon capital together with East Capital will provide the remaining equity (USD 20.5 million). The senior debt will be raised in the sum of USD 45.9 million. The EBRD’s Environment Department have evaluated this project and noted that the potential negative environmental impacts are readily identifiable and easily mitigated. Therefore a B/1 environmental rating has been assigned, requiring an environmental audit and analysis of the environmental impacts of the project. The audit and analysis took the form of a corporate environmental review whereby Cantik’s ability to construct 6 retail centres to Russian and EU standards were evaluated. Nova Linia’s ability to operate the stores to Russian and EU standards was also evaluated. The conclusions of the review and site visits by a member of the Bank’s Environment Department were that while there are a number of areas that require improvement no significant environmental and social risks were identified and the project presents a low environmental risk. Those areas needing improvement included hydrocarbon management, record keeping and health and safety for construction workers. Going forward the Bank will require Cantik to supply a number of documents for each site: copies of the Environmental Impact Assessment, results of soil and groundwater tests, and copies of all appropriate permits including those for utilities. Together with Nova Linia Cantik will be required to submit an annual environmental report detailing environmental issues and compliance status with regard to Russian and EU environmental standards. None. Chris S Kamtsios Dragon Capital 36-d Saksahanskogo 01 033 Kyiv Ukraine Tel: (+380-44) 490-7120 Fax: (+380-44) 490-7121 Website: www.dragon-capital.com Kestutis Sasnauskas East Capital Box 1364 SE-111 93 Stockholm Sweden Tel: +46 8 505 88 500 Website: www.eastcapital.com