Announcement of Investment in Colombia on August 10, 1962

Q \1 CORP OR ~\CI O:N F IN AN CIERA ··INTERNACIONAL . 1 8 1 8 H STREET,;~·. W., WASH I NG TON 25, D. C. • ' TELEFoNo, EXECUTIVE 3-6360 - IFC Press Release No.·~62/7 SUBJF.CT: Investment in Colombia. For Release (\ 12 Noon, Friday, August 10, 1962 In participation w:tth six private ban]:ts in the United states, Switzerland and \\ ll Germany, the Inj;ernational Finance . ,corpora.tion has ma.de a commitment to invest $2 million in Compa.nia Colombia.na de Tejidos, s.A. (COLTEJER), the largest cotton tex- ;) tile ;1 manufacturer in Latirt America.. I The transaction provides assistance to a i] " project of' ,t~J_ue - tou the Colombian . ceconomy, links lea.d.L"'lg banking .hquses on two con- tinents with one of Colombia/is pioneer industrial companies, and channels both United States and European capital into La.tin American development at a time when broadened financial support is one of the objectives of the Western Hemisphere • nations cooperating in the Allia...~ce for Progress •. The ~six participants a.re taking up by fa.r the greatest pa.rt of IFC 's ,.,commit- ment; their participations amount to $1,725,000, or about seven-eighths ofL the total. The participants are: Chemical Overseas.Fina.nee Corporation; New World Development Corporation Limited; Handelsfinanz A.G. (Zurich); Bankhaus Burkhardt & Co. (Essen); First Pennsylvania Overseas Finance Corporation; and Continental International Finance Corporation. The invest~nt, stock option and participation agreements were signed in New York ,.1 today at the head offices of Chemical Bank New York Trust Company, parent of' Chemi- cal overseas Finance Corporation. Tde investment is represented by two series of unsecured notes, each bearing interest of' 7% and each in the amount of $1,000,00Q'.(1 o~e series is repayable in • seven semi-annual installments due 1963-66. The other is repayable in seven semi- annual installments due 1966-69, and may be tendered for payment of' capital shares of the Company according to the stock option agreement.  0 \/ - - 2 - 1, Cl The $2 million investment will help COLTEJER to ,finance a $13 million modernization and expansion program started~' in 1959. Early in 1961 the Com- pany expanded its normal capital by about l~ with a:_,,rights issue which • raised Col.$26.8 million (about US$3 million), but later conditions in the Colombian capital m~ket were not favorable for the medium-term debentures '0 whi~h the Company"had P~rmoed to issue. Nor could the Company arrange the necessary longer-term fina.n~ing from banking sources, 'both inside and out- s;de Colombia, ,,from ~ich it normally meets its s);lort-term financial needs. 0 In January 1962, the Company's president,approached IFC, together with the president of Corporacion Financiera Nacional, a private Colombian develop- ment bank of which IFC itself is a shareholder. COLTEJER proposed an invest- ment of $2,qoo,000 at medium term; the Fina./~ciera strongly supported the pro- • ,; \, ,:) posal, but was not itself able to supply the required financing, in view of the size of the transaction and in view of the fact that a substantial part of its resources already were invested in COLTEJER. Af'ter s~udy, IFC's .management concluded that an investment in COLTEJER was amply justified by the importance of the project and the prospects for its suc- cess, and believed also that in a time of relative foreign-exC,hange stringency an outside investment would be helpful to the finances2of the country as a whole. ~ . The management felt, moreover, that in view of the quality of the Company -- its size, strength and general financial reputation -- IFC could enlist sub- stantial participation in its investment by other banks, and that such partici- pation not only would assist the Company, but also would give a useful demon- stration of investor confidence in Colombia and its future. •  - 3- COLTF.JER was.one of the firi;;t manufacturing enterprises to be ~stablished in Cofombia.. It was founded in 1Q07 as a joint· stock ~1ompa.ny, and today is· owned by W ,; some 30,000 shareholders. In .its textile and ot~er plants, all located in _the . area of' Medellin, it empl9ys some 8,200 persons. At the 'and of ·1961, it~ total assets were Col.$380 million (about US$43 million), and its ne\ worth was Col.$214 !/ (i million "( ~bout US$24 .million) • \\\ ·. COLTEJER owns the entire stock of' six s~bsidia.ry compa.nies,.four.of which, a )\ \~ (I wi.th COLTEJER., f~):m the integrated textile group of the enterprise. Tfle main t cperations of' the Company compr,ise spinning, weavihg and finishing of cotton and synthetic blend fabr:i.cs and the manu:racture of yarn and thread. COLTEJER's prolucts are a tangible part of the Colombian standard of living: the Company sup~lies nearly half of all cotton goods consumed in Colcmbia. For about a year, \\ COU'EJER's products have been moving in international trade; the Company has been ~ exp~rting small quantities of' cotton goods, especially to other Latin American coU1tries and to Africa. COLTEJER 's management has consistently been of good ·quality. The founder wa.s ·,) Altjandro Echavarria; since his death in 1928 the Company has been managed by members of the Echava.rricca family, though they own only a small part of the s·bck. Today's ,investment and stock option agreements were signed by the President aid chief executive 'officer of the company, Rodrigo Uribe-Echavarria, 44. He lolds a, degree in chemical engineering from the Massachusetts Institute of Tech- ~ology, and has been associated with the Company for 20 years. His predecessor, cirlos J. Echavarria, was president from 1940 to 1961; he is a graduate of Columbia Uliversity in New York and received an honorary degree f;rom"the Philadelphia Tex- tile Institute for his achievements as an industrialist • •  \~ 0 - 4- 0 i) • Two participants in today's transaction, Handels~anz A.G. -- Zurich and 1-1 Ba.nkhaus Burkhardt~'.& Co., are well-established European bapks; the United states ~<~) ,·, 1__) institutions a.re interl,18,tional investment a.:f'filia.tes of widely-known commercial banks. Chemical overseas Fina.nee· Corporation is affiliated to Chemical. 13ank New ~ork Trust Company; New World Development Corporation, Ltd., to Philadelphia Ifational Bank; First Pennsylvania overseas Finance Corporation to First Penn- { and Trust Company; and Continental International Fina.Qce Corpora- sylvania Ba.n.1~.:J-:".~ ~. - l tion to Continental Illinois National Bank and Trust Company of Chicago. • •