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EBRD signs loan to Ukrainian shipping company
The first river/sea transport company to go private in Ukraine, Ukrrichflot Joint Stock Shipping Company (Ukrrichflot), is to receive US$ 16.5 million (ECU 12.7 million) as a loan from the European Bank for Reconstruction and Development (EBRD), to finance its modernisation programme which includes the purchase of five new vessels.
Sven Hegstad, Director of the Restructuring/Privatisation team at the EBRD, said “We have worked the full circle with Ukricchflot, having advised on its privatisation and now assisting with its first loan as a private sector company. Ukrrichflot is a well placed, competitive player in a niche market ably managed by a strong team. The new ships will help it become more competitive in the international market.”
This is the first loan to a Ukrainian borrower including co-financing with a western commercial bank. The Bank of Scotland is co-financing US$ 8.25 million of the EBRD loan. Bank of Scotland has already co-financed one other EBRD shipping project in the region.
Nikolay Slavov, President of Ukrrichflot said: “EBRD’s assistance has been vital to Ukrrichflot not only in terms of getting our modernisation programme off the ground. Now that we are privatised we have had to learn how to negotiate on a different level which has been a huge learning curve for us but also immensely rewarding.”
The five new vessels, built by the Romanian shipyard Oltenitsa, will replace some of the older ships in the fleet, which has an average age of 15 years. The vessels are being financed on a dual flag basis, registered in Cyprus with a Cypriot mortgage, and “bareboat” chartered back to Ukrrichflot in Ukraine. The upgrading will mean that Ukrrichflot will be able to reduce operating costs while the modernisation programme is structured around other cost saving measures.
Based in Kiev, Ukrrichflot’s principal business is in domestic and international river and river-sea transportation of freight and passengers. Its niche market is small cargo shipments primarily on the Dnieper River, as well as the entire Black Sea region, the eastern Mediterranean and the Danube. Many of the 400 ships are built to travel by river meaning that small orders of cargo can be shipped long distances without having to be trans-shipped.
The EBRD has been working with Ukrrichflot since early 1993 when it acted as financial advisor for its privatisation and to assist in finding investors.
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