Manufacturas Del Tropico, S.A.

Project Description: Manufacturas Del Trópico is a manufacturer of outdoor furniture, also known as casual furniture, which is presently sold in the U.S. under the Weathercraft brand name and distributed by Lane Venture, a U.S. furniture company that produces and distributes high quality furniture to the high-end segment of the market. The Company's manufacturing and administrative facilities are located in the town of Choloma, near the city of San Pedro Sula, Hondura's industrial center.



The proposed project involves the expansion of Del Trópico's production facilities by moving some of its processes to new production facilities and expanding its production capacity. The project involves building 8,050 square meters of additional industrial space, buying and installing production equipment, enhancing the plant's environmental and labor conditions, improving its MIS systems by replacing hardware and acquiring new integrated software, as well as supplying the required working capital to support the increased production and sales stemming from the expansion.



The increased production capacity stemming from the proposed expansion will be utilized to increase sales to Lane Venture as well as to diversify the Company's client base by developing the European and Latin American markets.



Through the project, the following objectives will be achieved:



Promote Technology Transfer. Del Trópico presently operates under a strategic alliance with Lane Venture, a major U.S. casual furniture manufacturer and distributor. Under this agreement, Del Trópico has not only been able to secure a stable market for its products in the U.S., but also to gain significant knowledge and absorb modern techniques applicable to the manufacturing of casual furniture. By providing funding for Del Trópico's modernization and expansion project, the Company will be able not only to expand its sales with Lane Venture, but also to develop new markets on its own. The knowledge acquired through years of association with Lane Venture and its main suppliers has allowed the Company to develop new production techniques, as well as design new lines of products aimed at lower price market niches. These factors are increasing the Company's competitiveness and market diversification, helping it move a step further in its consolidation as a world class furniture manufacturer.



Support a Key Industry, Foreign Exchange/High Employment Generator. Through the proposed loan, the IIC will support the modernization and expansion of a manufacturing business that is already responsible for the employment of 426 Honduran workers and for the generation of a significant amount of foreign exchange due to its export oriented activities. Through the proposed expansion and modernization project, the Company will generate an additional 600 jobs and help the Honduran balance of payments by providing additional foreign exchange for the country. A total of approximately US$68 million of additional foreign exchange are expected to be generated by 2008 as a result of the project. This role is of particular importance at a time when Honduras is struggling to recover from the dramatic effects of Hurricane Mitch.



Improve Environmental and Labor Conditions. The expansion project subject to the IIC's financing includes a series of investments that will enhance the already careful approach the Company takes with regard to the environment and to the safety of workers.



Scarce Long-Term Financing. The IIC will provide long-term financing in appropriate conditions to help finance the expansion and modernization of a successful Honduran exporter. Long-term financing, particularly in the amounts required by this project, is difficult to obtain locally. By providing long-term funding, the IIC will allow Del Trópico to strengthen its financial structure, improve its competitive position, and develop new markets for its products, thus allowing it to better cope with the demanding conditions of the international markets where the Company sells its products.



Quasi-equity Financing. By providing a sub-loan, the IIC is helping to strengthen the Company's capital structure and to turn the financial plan for the project into a viable proposition. Equity is the most scarce form of capital financing in the Honduran financial market. By providing quasi-equity, the IIC is strengthening and stabilizing the Company's balance sheet. By providing a longer grace period and the flexibility to defer principal payments when necessary, the sub-loan would permit the Company to implement its expansion and consolidate its new markets without having to face the additional pressure on its cash flow that senior debt would impose.