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New EBRD credit line facilities for Hungarian banks
As part of its ongoing strategy to strengthen financial institutions in Hungary, the European Bank for Reconstruction and Development (EBRD) signed two credit facilities yesterday. An existing credit line to Kereskedelmi Bank, targeted at the agricultural industry, has been extended with a further US$ 40 million (ECU 31.2 million). In a separate transaction, Hungary's only investment and development bank, Hungarian Bank for Investment and Development (MBFB), signed a US$ 20 million (ECU 15.6 million) facility.
David Hexter, Deputy Vice President of the EBRD, said "The success of the EBRD's existing agribusiness credit lines has demonstrated the effectiveness of working with local financial intermediaries. Over 400 small agribusinesses have been able to benefit from this programme."
Regarding MBFB, Mr Hexter continued "Extending this loan to MBFB will allow them to increase their investment banking activities and their capacity to provide medium-term lending. Overall, the market will become more competitive as access to term financing for medium-sized companies grows."
The initial agricultural restructuring project, signed in 1993, was for US$ 103 million
(ECU 80 million), granted to four banks. Due to the high demand for term financing, the EBRD extended its funding to Budapest Bank Rt, with a further US$ 15 million (ECU 11.7 million) in October 1995. To date, the EBRD has provided US$ 174 million (ECU 136 million) for the development of the Hungarian agribusiness sector. The two other banks are OTP Bank and Magyar Hitel Bank, and the loans are guaranteed by the Republic of Hungary.
The EBRD loan to MBFB, which is not state guaranteed, will help strengthen the bank institutionally and allow it to provide term lending of up to seven years. Proceeds are to be on-lent to private companies and public sector companies in transition that comply with certain conditions (i.e. are commercially managed, operate in a competitive environment, etc). MBFB was established in 1993 to assist with the reorientation of the Hungarian economy and the development of the private sector.
With these two facilities the EBRD's exposure to the Hungarian banking sector is US$ 315.5 million (ECU 246 million) of which 23 per cent is equity.
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