CONRAD  Modernization -- conference center/room renovation Conrad, a five star business hotel, was established with IFC''s assistance in 1989. The proposed project will be the third project with the company. The first investment was approved in 1990 and it involved an A loan of US$24 million, a B loan of US$27.5 million, and an equity of US$4 million. The hotel''s opening in 1992 coincided with depressed market conditions, resulting from the effects of the Gulf war, and strong growth in the number of five-stars capacity, therefore the project was restructured in 1993 when the Board approved an additional US$6.5 million (A loan of US$3 million and B loan of US$3.5 million).  Since the restructuring, Conrad Hotel has showed sound operations and has demonstrated its viability.  Today, all B-loans have been repaid (in 1998) and in 1998 IFC has sold its equity share to a local sponsor: Aksoy Group.  As of March 2002, IFC''s exposure decreased to US$8.3 million.  The proposed investment includes a mid-size conference center and a room/accommodation refurbishment program, which is expected: i) to improve Conrads competitive position for mid-size conferences;  ii) to lead to better utilization of previously dormant and wasted space, converting it into revenue generating property; and iii) to provide higher margins and occupancy rates, thus making the hotel less prone to seasonality.  The business/conference segment of the tourism industry provides good prospects for higher occupancy rates.  After this investment, Conrad will be better able to face its competitors by providing conference facilities and high level of standards rooms. The project will not increase the 667 room-capacity of the hotel.     IFC Role   : After the recent political and macro economical turmoil, interest rates in Turkey have skyrocketed, and credits have become very scarce.  More importantly, local financial institutions do not provide the financial depth required for the long-term, outward looking strategic development of major corporations in Turkey.  Loan maturities, exceeding even a one year range, are currently not available to the Turkish market.  Without IFCs investment, the company would be forced to rely on extremely limited, short-term, and more expensive financing which would adversely affect liquidity.  In the context of the uncertain economic environment, the project critically supports the sustained and competitive evolution of the tourism industry, a vital sector for Turkish economy, where total revenues of more than US$8 billion were earned in 2001.       World Bank Group Strategy:    The World Bank Group and IMF have focused recent efforts on helping Turkey cope with its financial crisis through continuing adjustment lending, support of structural reforms,0 and fiscal stabilization.  This project is consistent with both World Bank strategy and with IFC''s country strategy for Turkey, which seeks to: restore stable growth, improve living standards, reduce economic vulnerability and poverty, and aid the private sector to take advantage of the opportunities offered by the reform.  By reinforcing the financial structure of an export-earning  company, IFC supports an inflow of foreign currency earnings for Turkey.      Development Impact:    The proposed project will have a significant development impact.  IFCs support of the project is critical at a time when higher inflation, shrinking domestic demand, and price increases have stagnated the economy, especially manufacturing sector, which has brought about massive layoffs, causing severe economic and social instability in the country.  The hotel is internationally competitive and has provided export-earnings in the range of US$21 to US$31 million in the past few years.  It employs some 400 staff. By providing timely financing, IFC will help the company seize the market opportunity, and adapt to the latest market requirements. It will also enable the hotel to diversify its income base since the business/conference segment of the tourism industry is less prone to seasonality and regional events.