Megabank is beneficially owned by Mr. Victor Subotin (the “Sponsor”). Mr. Subotin owns close to 90% of the Bank’s equity, directly and indirectly. Mr. Subotin is the Chairman of the Supervisory Board of Megabank, and is currently the General Director of Turboatom, a 75% state-owned company and Ukraine’s leading manufacturer of turbines for hydro, gas and nuclear reactors.

The Bank’s shareholders recently injected UAH150 million (approximately $19 million) into the Bank’s capital. This was the first equity injection in a private bank in Ukraine since the onset of the crisis in September 2008.

The Bank is listed on the Ukrainian stock exchange, and the Bank’s other shareholders include private Western portfolio investors.

IFC’s investment will consist of:

- $10 million in 3-year convertible senior loan and
- $10 million 7-year subordinated loan.

20.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	20.0
Equity	0.0

* These investment figures are indicative

The Bank is headquartered in the city of Kharkiv, the third largest city in Ukraine. The Bank operates 194 branches in 25 regions of the country, mostly in urban or suburban areas. Investments can be made throughout the country.

Financial Market Stability: The Project is expected to help reassure depositors, borrowers and creditors about the financial health of Megabank and instill confidence in Ukraine’s banking sector.

Contribution to Economic Growth: Banking penetration in Ukraine is mainly concentrated in the capital, Kyiv. The proposed Project will increase the availability of banking services and range of financial products outside Kyiv, particularly in the Kharkiv region which has a high concentration of SMEs. More importantly, this investment will help Megabank expand the availability of financial services in 6 out of the 10 frontier regions in Ukraine in which it has existing presence. The Project is expected to help speed up economic recovery and therefore help create and maintain jobs in Ukraine.

Provision of Scarce Financial Resources: IFC will provide Megabank with much needed counter-cyclical funding during the current liquidity crisis in the international financial markets. In the absence of a better-developed local debt market, the Bank’s core funding comprises short-term customer deposits. IFC will help the Bank improve its maturity mismatch by providing it with sustainable long-term financing alternatives.

Demonstrating Confidence: The proposed project will be IFC’s first investment in a medium-sized regional bank in Ukraine and comes at a critical time for the Ukrainian banking sector. IFC’s presence will strengthen Megabank’s reputation, helping increase market and customer confidence in the Bank during this critical time. This will in turn make the Bank an attractive acquisition target to the benefit of the future consolidation of the Ukrainian banking sector.

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. IFC has analyzed Megabank''s portfolio, and the activities proposed to be supported with IFC financing for types of transactions, size, tenor and industry sectors and determined the Applicable Performance Requirements to include a combination of:

- The IFC FI Exclusion List and
- The applicable National Social and Environmental Laws and regulations.

IFC has also reviewed Megbank''s labor practices and its exiting Social & Environmental Management System (SEMS) and its capacity to implement the same. IFC has suggested Supplemental Actions to address gaps in the SEMS. It was found that Megabank currently follows EBRD guidelines and has integrated some level of social and environmental risk assessment into its credit risk procedures. Megabank has satisfactorily informed the IFC regarding its labor and working conditions. Based on the review, Megabank will be required to:

- Develop an SEMS prior to disbursement to the satisfaction of IFC,
- Identify responsible, qualified persons to manage and implement the SEMS,
- Commit to implement the SEMS, to ensure that its investments/activities supported by IFC financing are in compliance with the Applicable Performance Requirements, and
- Submit a periodic report to IFC as per a format to be provided by IFC.