Financed ProjectsSAS III

Identification Code:

OP/13/0052

Total Operation Cost:

0

Maturity:

months

Operation Status:

Description and Purpose of the Operation:

SAS Group LLC Armenia, (the "SAS Group", the "Company" or "SAS") is planning to implement a development program in the 2014-2015 timeframe, divided in 4 investment packages: 1. Conversion of a building into a functioning supermarket with a total area of 2,800m2 at Arshakunyats Avenue in Yerevan (the "SAS Arshakunyants"); 2. Conversion of an existing warehouse space into a pastry & bakery facility in Yerevan (the "SAS Sweet"); 3. Modernization of bakery and/or kitchen facilities at four of the existing supermarkets; 4. Launching of an On-line Supermarket. The Operation represents a long-term corporate loan to SAS Group including: a) USD 7,500,000 million in new disbursements to finance the capital expenditure program of the Company; b) USD 2,645,000 of the Company's indebtedness to BSTDB that remains outstanding following the payment of principal installment on 10 January 2014. The new disbursements and the existing indebtedness will be consolidated in a single loan of the total amount of USD 10,145,000 with repayment schedule of 7 years including 2 years of grace period (for principal repayment only).

Countries of Operation:

Armenia (100,00 %)

Financial Product:

Loans

Sector:

Consumer Staples

Domain:

Private

Borrower/Client:

SAS Group LLC

Co-Financiers/Participants:

Guarantors/Sponsors:

a) LandFro LLC, a limited liability company incorporated in the Republic of Armenia (the "First Guarantor"), b) LandLord LLC, a limited liability company incorporated in the Republic of Georgia (the "Second Guarantor")

Developmental and Regional Cooperation Impact:

The Bank will provide long-term financing, the supply of which from local financial sector and international institutions is nowadays limited in Armenia. The Bank will support further growth of one of the largest retail trade operators in Yerevan.

Environmental Classification and Impact (summary):

The Operation involves financing of the corporate development program of SAS Group LLC, which includes construction of a new supermarket of 2,800 m2 total area in Yerevan; construction of a pastry and bakery facility; construction of bakery and/or kitchen facilities at four existing supermarkets; and launching of an on-line supermarket. SAS Group is an existing Client of the Bank and the environmental and health and safety assessment of risks and impacts associated with its retail business have been assessed previously and its performance in this respect is being monitored on annual basis. The experience accumulated by the Bank in terms of risk and impact prevention and mitigation measures applied by the Client has been positive. Its supermarkets are operating in line with national EHS requirements and the internal rules for housekeeping, hygiene and product safety. These include among others regular training of sales and maintenance staff on housekeeping, hygiene and safety issues, periodic medical check-ups of the staff, timely removal of expired and soon-to-expire products from shelve and return to suppliers or appropriate disposal or destruction, implementation of necessary pest control measures at the supermarkets storing facilities and retail areas, collection and segregation of solid wastes, etc. In terms of implications on the Bank's Environmental and Social Exclusion List the Client reported that the revenues from alcoholic beverages with alcohol content in excess of 20% and tobacco products are bellow the threshold of 10% each, which is in line with the provisions of the List. Overall the Client's environmental and health and safety performance has been assessed as satisfactory. Considering the above the operation has been screed as Category B, and the Environmental and Social Assessment was carried out with a limited scope focusing mainly on the following key issues: 1) Legal and regulatory compliance of the new supermarket, he pastry and baking facility, and the upgrade of the existing supermarkets with baking and kitchen facilities - The new supermarket does not require a special authorization or permit, and the general environmental, health and safety requirements are applied. Nevertheless, the pastry and baking facilities, as well as the baking and kitchen facilities to be installed at the supermarkets require a special permit for organization and operation of public food preparation facilities from the Municipality, which the Client duly obtained; 2) Health, safety and hygiene - The Client committed to follow the applicable legal requirements in effect, and will introduce the internal rules currently applied at the existing supermarkets; 3) Labour and working conditions - The Client will create about 80 new permanent jobs and will apply the local labour code and observe its stipulations in terms of minimum age of employment, minimum wage, overtime hours, working hours per week, benefits, health and safety at the workplace, grievance mechanism, etc., as well as apply the internal HR policies; and 4) Pollution prevention and abatement - The measures applied by the Client meet the local requirements in terms of refrigeration and baking equipment, solid waste management, management of expired and soon-to-expire products, and hazardous waste management. The assessment concluded that the key risks and impacts associated with these issues are limited in nature and not likely to be significant. Any existing issue can be readily and efficiently prevented and mitigated by the measures and practices applied by the Client, which are considered to meet the recognized performance standards, guidelines and design criteria for retail businesses.

Operation Leader:

General Industries, Transport, Tourism 1

E-mail:

gitt1@bstdb.org