The main sponsor is Arabesque SRL, a limited liability company incorporated under the laws of Romania. Established in 1994 by Mr. Cezar Rapotan, it started operations with a small warehouse in the Southeastern town of Galati, Romania and since then has grown its operations in Romania, Ukraine and Moldova, supplying a wide array of materials through its distribution centers spread over 30 cities in these three countries. The company currently employs over 3000 employees.

The total capital expenditure over the next three years is broadly estimated at around EUR 90 million. IFC proposes to invest up to EUR 28 million in A loan for IFC’s own account and syndicate an additional EUR 28 million in B Loan. IFC will also provide a guarantee of up to $10.5 million for Arabesque’s payment obligations related to the purchase of shares in Budmax.

46.01 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee	10.50
Loan	35.51
Equity

* These investment figures are indicative

Arabesque is headquartered in Galati, Romania and serves various cities throughout Romania, Ukraine and Moldova. The proceeds of the IFC funding will be used by Arabesque for its existing network of distribution centers as well as new centers to be established in Bulgaria and Serbia.

The expansion of Arabesque’s existing operations as well as its entry into new markets will have substantial development impact. Arabesque’s operations will continue to strengthen local supply chains in these countries. Modernization of the wholesale sector will be achieved particularly in countries such as Ukraine, Moldova, Bulgaria and Serbia through the introduction of modern business practices brought in by an experienced Romanian company. Operations in these countries would benefit from the more efficient western style warehouses and distribution practices as well as the larger store format, while consumers will benefit through better choice and lower prices due to the economies of scale. The project will also generate significant employment (e.g. 100-200 new jobs in Ukraine alone).

IFC’s role in this project is to support a privately owned well run distribution and logistics company and to assist Arabesque in modernizing and expanding its operations. IFC’s presence in this transaction will help increase investor’s confidence in these countries business environments where Arabesque has been unable to satisfactorily obtain the needed funds from the local or foreign commercial banks. Additionally, IFC long tenors tailored to meet the cash flow needs of the Project will help further strengthen Arabesque’s long term financial position. Finally, IFC is assisting the company in enhancing its environmental, social and corporate governance practices.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because it may create a limited number of specific environmental and social impacts that can be avoided or mitigated by adhering to generally recognized performance standards, guidelines, or design criteria. Operation of Arabesque’s warehousing and distribution centers generate small quantities of solid waste in the form of packaging materials, wooden pallets, etc. and sanitary effluents, all of which are adequately managed in compliance with Romanian regulatory requirements. Environmental health and safety issues are effectively managed at the corporate level by a director who has oversight of Labor Safety, Environmental Protection, Emergency Situations and Mechanical Maintenance for Arabesque’s operations in Romania. Consistent with its operations in Romania, Arabesque will expand its management system to provide oversight of EH&S issues for existing and future operations in other countries where Arabesque is planning to expand its business.

Performance standards that are applicable for this investment include:

PS 1: Social and Environmental Assessment and Management System
PS 2: Labor and Working Conditions
PS 3: Pollution Prevention and Abatement

Arabesque has good neighborly relations with the communities in which they operate. No local communities are significantly affected by environmental risks or impacts from Arabesque''s operations as a supplier for construction materials. Arabesque’s operations create jobs and other opportunities for local communities, and have no adverse social impacts. As a result, no formal information dissemination activities have been undertaken. Notwithstanding, as part of its ESMS program, Arabesque will establish methods for communicating environmental and social aspects to external interested parties and maintain procedures for receiving, documenting and responding to concerns from any external interested parties relating to the project.

Upon successful implementation of agreed mitigation measures, the proposed project is expected to comply with host country laws and regulations and IFC Performance Standards.