Sise Ve Cam Working Capital

completed

The project is a proposed corporate loan to the Sisecam Group, with Sise ve Cam Fabrikalari (the holding company of the Group) as the borrower, and Trakya Cam, Pasabahce Cam, Anadolu Cam and Cam Elyaf as co-borrowers; all are long standing clients of IFC. The co-borrowers have been identified as principal users of the loan, with indicative amounts as incremental working capital requirements allotted to each of them. However, on disbursement of the loan, the borrower will decide on the actual amount of distribution depending on the immediate and current working capital needs of the co-borrowers.The recent crisis in Turkey has severely curtailed domestic market demand in the manufacturing sector, presenting challenges for the corporate sector at large. The Sisecam Group, which is dominant in the domestic glass market (67% of total sales), is attempting to mitigate the impact of falling sales by increasing exports. With an existing export base of about $330 million, which is expected to grow, the Group is faced with the challenge of finding dependable source of funding to finance its exports. Exports typically require higher working capital due to the longer receivables period and additional inventory carrying costs. The Group is funding its existing working capital requirements through short term debt financing, payable in one year, subject to rollover at renewal. In the past, such rollovers were routinely granted but, given the present state of the Turkish economy, Sisecam is finding it increasingly difficult to extend its short term debts from local or foreign banks. Local Turkish Lira loans from Turkish Eximbank are harder to obtain, while foreign banks have reached their Turkish exposure limits and are unwilling to extend existing or new loans. As a result, the Group is looking to IFC to provide a dependable and stable source of future financing for working capital needs with a $35 million loan. This loan would mitigate some of Sisecam''s liquidity constraints and increase its export marketing capacity. After the recent political and macro economical turmoil, interest rates in Turkey have increased sharply and credits have become very scarce. More importantly, local financial institutions do not provide the financial depth required for the long-term, outward looking strategic development of major corporations in Turkey. Loan maturities exceeding even a one year range are currently not available to the Turkish market. In addition, Turkish Eximbank does not have sufficient resources to provide Sisecam''s export credit requirements and to process the applications in a timely manner. Without IFC’s investment, the Group would be forced to rely on extremely limited, short-term and more expensive financing which would adversely affect liquidity. In the context of the uncertain economic environment and competitive pressures in the regional glass sector, the project critically supports the sustained and competitive evolution of a vital Turkish corporation.