IFC offers US$65 million to revitalize distressed companies
For struggling companies based in East Asia’s emerging markets, this much-needed capital is intended to turnaround firms with high social and development impact
IFC, a member of the World Bank Group, the IFC Financial Institutions Growth Fund and the IFC Emerging Asia Fund, two funds managed by IFC Asset Management Company (AMC), are investing up to US$65 million in Altus Special Situations Asia 1 LP. The investment will support distressed companies in East Asia's emerging markets with financing to ensure they can meet their financial obligations, regain creditworthiness, and preserve jobs, thereby contributing to sustainable growth.
Companies in the region face a myriad of challenges, despite strong economic growth. For instance, in some markets, following the global financial crisis, loan defaults among highly leveraged corporations have increased, and a ballooning of non-performing loans (NPLs) has locked in banking capital. As a result, financially distressed companies are unable to obtain credit to restore viability and rebuild their operations.
Through its global Distressed Assets Recovery Program (DARP), IFC works with partners to build regional platforms across emerging markets and catalyze other institutional investors to invest in distressed assets. The investment will enable Altus to set up a regional facility to invest in the Philippines, Thailand, Indonesia, and Vietnam, the latter two being nascent markets for distressed asset recovery. With this investment, IFC and AMC seek to support this growing and attractive market for investors.
"I am excited to embark on this next phase of Altus Capital's expansion with our partners at IFC, AMC and other institutional investors," says Pavan Gidwani, Altus Capital's CEO.
He adds, "We welcome Altus playing a dynamic role as both a hands-on investor and an asset manager within this growing region, actively assisting to unlock value in viable but underperforming middle-market companies, as well as in hard assets in need of redevelopment and repositioning. Our track record provides many documented successful turnaround stories in various sectors and markets, all with high social and development impact. We are fully committed to build upon that continuing legacy with our new fund."
Altus Special Situations Asia 1 LP will have up to $272.5 million of deployable capital. IFC, IFC Financial Institutions Growth Fund, and IFC Emerging Asia Fund will be contributing up to US$15 million, US$25 million, and US$25 million, respectively. Altus Capital Corporation will contribute US$7.5 million.
"IFC's support is likely to promote greater market integration for distressed asset resolution through the creation of a regional platform. This will mobilize much needed regional and international capital for distressed companies to make them viable again," says Vivek Pathak, IFC director for East Asia and Pacific.
He adds, "Subsequently, these companies can plan for long-term, sustainable growth that increases job opportunities, driving economic growth in the region."
"The IFC Financial Institutions Growth Fund and the IFC Emerging Asia Fund are pleased to invest in Altus, which will provide much needed capital and expertise for companies in the region that have struggled to perform. In doing so, the funds see an opportunity to enhance this impact and create good financial returns for our investors," notes Marcos Brujis, chief executive officer, IFC Asset Management Company.
IFC has worked with Altus—an existing DARP partner—since 2012. As of March 2018, IFC DARP has deployed over US$5.5 billion focused on distressed assets globally. In Asia, IFC DARP's active projects include IFC commitments of approximately US$525 million and co-investments of approximately US$560 million.