JBIC Signs Loan Agreement with MegaFon of Russia Support for Japanese Firms' Export to Russia through Corporate Risk-Taking Loan
NR/2005-67
January 17, 2006
January 17, 2006
- Japan Bank for International Cooperation (JBIC; Governor: Kyosuke Shinozawa) signed a loan agreement on January 16 totaling up to US$50 million with Open Joint Stock Company "MegaFon," a Russian corporation. This loan (buyer's credit)*1 is cofinanced with Citibank N.A. (Tokyo Branch) and CALYON (Tokyo Branch).
- The loan will financially support Japanese exports by providing a direct loan to MegaFon, one of the major cellular operators located in Moscow, Russia, to import microwave radio systems from NEC in Japan. The microwave radio systems are imported to provide short-haul access links such as those between cell-phone base stations.
- Amidst the background of the robust economic growth in recent years, Russia's GDP grew by 7.1% in 2004, the number of cellular subscribers in the country as well as the penetration rate of cell-phones in Russia have been rapidly increasing. In an effort to expand the range of services and to increase customer acquisition, MegaFon and other domestic cellular operators have been making active investments in arranging and enlarging the basic infrastructure. As a result, the chances for receiving orders have expanded in Russia for telecommunications equipment makers across the world, including NEC and other Japanese firms, and competition has intensified among them. JBIC supports the promotion of Japanese firms' exports to Russia by providing direct loans for Russian firms, as indicated by this loan.
- Marking a shift from the past policy of obtaining guarantees by the Russian government, JBIC assumed the credit risk of the Russian corporation directly in financing the loan for MegaFon. MegaFon is the second Russian corporation to receive JBIC's corporate risk-taking loan. Based on the "Japan-Russia Action Plan," which aims to promote trade and investment, signed between the two countries in January 2003, and also the improved credit standing of Russian corporations and acceleration of business activities with Russia by Japanese firms in recent years,*2 JBIC intends to take corporate risks in financing Russian corporations to support the exports of Japanese firms to Russia, while closely watching the credit standing of Russian corporations.
- *1 Buyer's credit is a financial instrument extended directly to an importer in the receiving country to finance the purchase of machinery and equipment from Japan.
- *2 In the "Japanese Manufacturers' Overseas Business Operations 2005," an annual survey conducted by JBIC, Japanese manufacturing companies indicated growing interest in Russia and voted the country as the 6th most promising destination for expanding their business activities.
