In a transaction that aims to provide Hungarian shoppers with a wider variety and cheaper prices, the European Bank for Reconstruction and Development and Raiffeisen Zentralbank Oesterreich have arranged a €160 million loan to finance expansion of the Cora hypermarket stores owned by the French-Belgian retailer, Louis Delhaize, and operated by its Hungarian franchisee.
The loan will enable Louis Delhaize, which currently has a turnover of €30 billion a year, to build three new hypermarkets in the country, including at least one in Budapest, in addition to its six existing buildings. The total project cost is estimated to be €267 million.
The expansion marks an important development in Hungary, where only about a third of retail food distribution is currently conducted through modern hypermarkets and supermarkets, compared with around 80 per cent in western Europe. The EBRD may soon provide further finance for new hypermarkets owned by Louis Delhaize and operated under the Cora name in Romania and Serbia and Montenegro, where the market penetration of such stores is even lower.
Of the €160 million being lent to Hungary, the EBRD will take up to €65 million on its own books, €95 million will be syndicated to commercial banks, with RZB as a mandated joint arranger underwriting €48 million out of the €95 million. The syndication process is being launched today, the Bank said.
Jean Lemierre, president of the EBRD, said that he believed the confident expansion of Louis Delhaize with its partner in Hungary will not only deepen competition in the food retailing sector, but also serve to mobilise outside capital and demonstrate the enormous potential of the market to other investors. He added that the deal could not have been sealed without co-operation with the RZB.
Vincent Descours, CFO of Louis Delhaize, said the loan will permit Louis Delhaize to accelerate its expansion of hypermarkets operated under the Cora name in central and eastern Europe, a formula that has proved successful to date. The EBRD said that it will be able to provide a regional financing solution for future requirements.
Karl Sevelda, RZB Board Member in charge of Austrian and Multilateral Corporate Customers said: "We are proud to work alongside the EBRD again. Our good co-operation has a long track record. We currently rank second on the EBRD's list of participants, which proves both RZB's commitment to Central and Eastern Europe in general and its importance for the region's industry specifically."
The EBRD, owned by 60 countries and two intergovernmental institutions, aims to foster the transition from centrally planned to market economies in central and eastern Europe and the Commonwealth of Independent States. RZB, the central institution of Austria's Raiffeisen Banking Group, considers central and eastern Europe its home market and operates a network of 14 subsidiary banks with 700 banking outlets, as well as two representative offices, in 15 markets of the region.