The IFC agreed to make available $20 million - $5 million invested and a loan of $15 million - thrown into the pot with $10 million from Singaporean Toleram Group and a $2 million investment and another loan of $5 million from a German company, Deutsch Entwicklungsgesells (DEG). With other minor investors, Toleram's shot in the arm comes to $46 million.
Finance Minister Roberts Zile, speaking at the Banking and Finance in the Baltics '98 conference in Riga last week said that Latvia needs such foreign investors, and that the Toleram agreement shows that these investors have not forsaken Latvia.
"This further affirms Toleram Group's committment to the Baltics to play an active role in the general economic development of countries," Mohan K. Vaswani, chairman, said.
The pact gives Toleram Fibers (formerly Dauteks) international ownership with 75 percent for Toleram Group, and the remainder of the pie cut four ways: the Latvian state (3 percent), IFC (15 percent), DBS Bank Singapore (2 percent) and DEG (5 percent).
Modernization, to be completed in two phases by 2001, will bring an annual projected turnover of $100 million, Satish Taparia, Toleram spokesman said. The company manufactures textile products including tire cord, and an assortment of industrial fibers.
"Modernization includes the process of ISO 9000 registration, which will be effected through improving and recording all operating systems and procedures," he said.
The downside of the deal is that modernization will cut jobs by a third, from 3,000 to 2,000. Still, fewer solid jobs are worth more than more jobs with a shaky future, Taparia said
Toleram Fibers, with a share capital of 46.3 million lats ($81.2 million), had a loss of 10.8 million lats after taxes on a turnover of 26.2 million lats in 1997.
The Toleram Fibers investment joins three other investments in IFC's Latvia portfolio. During 1997 and 1998 IFC invested $6 million in the financial services of Verinsbank Riga, $4 million in the pulp, paper and timber sector of Vika wood sawmill in 1997 and in Tilts Communications, $19.1 million for its Lattelekom infrastructure development in 1995.
Latvijas Unibanka is guaranteeing the work capital for the Toleram Fibers project.