Grupo Galicia

completed

The proposed project involves a $25 million secured loan to Banco de Galicia y Buenos Aires (the Bank, Banco Galicia or BG), with a tenor of up to 7 years. The funds would be utilized by the Bank to onlend to export-oriented SMEs and mid-size corporates in Argentina. Banco Galicia, founded in 1905, is a universal bank providing a wide variety of banking products and services to medium- and small-sized companies, large corporations, and individuals. BG is the largest private-sector commercial bank in Argentina by total assets and by private-sector loans, commanding 11% and 7% respectively of the market share as of September 30, 2004. As of that date, BG had total assets of $7.6 billion, shareholders equity of $415 million and deposits of $2.1 billion on a consolidated basis. The Bank currently serves a total of about 2.7 million customers. In May 2004, BG successfully restructured debt totaling $1.5 billion to over 240 banks and other creditors. The restructuring involved the active participation of IFC as Chair of the ad hoc steering committee of Galicia’s financial creditors. The debt restructuring enhanced Tier I capital by $49 million and Tier II capital by $230 million, and extended debt maturities while reducing interest expenses. For the last two years, Argentina has steadily regained economic ground after having undergone a deep recession. In tandem with this recovery, the banking sector is now faced with rapidly increasing credit demand stemming from the sharp growth rates in exports, the creation and expansion of SMEs, and industrial output. Among private Argentine banks, Banco Galicia has particular expertise in funding SME, corporate and agribusiness borrowers. As access to medium- and long-term borrowing is very scarce in Argentina, local companies would greatly benefit from longer tenors for much-needed capital expenditures and permanent working capital to support increased export activity.