International Finance Corporation and Hong Kong-based investment management firm ADM Capital will set up a lending platform with a target size of $200 million to support financially stressed companies in Asia.
IFC, the private-sector lending arm of the World Bank, said in a statement that the ADM Capital Somei Lending Platform will help stressed small and medium enterprises (SMEs) that operate in dysfunctional markets or companies in special situations that face lending constraints and urgently need funding to continue operations.
IFC, and another financial institution that it didn’t name, have each committed seed capital of $50 million to the Somei Platform. The platform will offer individual loans in a range of $10 million to $15 million with maturities of three to five years.
“While Asia has been somewhat less affected by the recent financial crises, small and midsize companies critical to Asia’s economies suffer the most from a dearth of financing," said Marcos Brujis, IFC director of Financial Institutions Group. “Through this platform, IFC and ADM Capital will continue to support viable businesses to save jobs, protect employees, and increase the welfare among communities.”
IFC’s tie-up with ADM comes barely a month after the World Bank arm agreed to form a $1 billion platform along with global alternative investments firm Apollo Global to buy pools of distressed assets in emerging markets.
The development comes at a time when a number of companies are looking to invest in or acquire stressed assets in India, as bad loans at banks mount and debt-laden companies seek to sell assets. In March, for instance, Kotak Mahindra Group signed a pact with Canada Pension Plan Investment Board to invest up to $525 million in stressed assets in the country’s banking and corporate sectors.
US private equity firm JC Flowers & Co is floating a joint venture with Ashok Wadhwa-led investment bank Ambit Holdings Pvt Ltd to acquire stressed assets in India. In February, financial services firm SREI Alternative Investment Managers Ltd, part of Kolkata-based SREI Group, said it was looking to float a Rs 2,000 crore fund to invest in debt instruments of stressed companies.
The Somei platform will provide long-term debt to companies in need while offering its lenders limited downside via over-collateralized positions and modest upside through profit sharing, the IFC statement said. Investors will take part in the Somei platform in the form of syndicated loans with a revolving senior tranche plus a junior tranche and principal repayment to investors after eight years, it added.
ADM Capital, which was founded in 1998 in the aftermath of the Asian financial crisis, has $1.2 billion assets under management as of March 31, 2016. It has seven offices in Hong Kong, Mumbai, Moscow, Istanbul, London, Almaty and Kiev. The firm seeks to grow capital by focusing on rehabilitating operationally strong but financially stressed companies via restructuring, refinancing, debt-equity swaps and liquidity management.
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