International Finance Corporation (IFC), the private-sector investment arm of the World Bank, is creating a large platform along with global alternative investments firm Apollo Global to buy pools of distressed assets in emerging markets.
IFC will put in $500 million through a mix of debt and equity that would be earmarked for acquisition of non-performing loans of lenders in the target markets. An additional corpus of up to $500 million will be mobilised from Apollo, as per a disclosure.
The platform will be in the form of a special purpose vehicle domiciled in Luxembourg, and several local SPVs based in the target markets. The SPVs will buy portfolios of bad loans related to retail and SME borrowers.
IFC said the platform will enable financial institutions to offload their bad loans, strengthening their balance sheets, freeing up capital, and generating liquidity and capacity to provide new loans.
“As financial intermediaries increase the sale of NPLs to private investors, the transparency of these institutions' balance sheets improves, as these assets are priced according to market conditions,” it added.
Indeed, bad loans of state-run lenders have been a big pain in India. International investors have particularly re-rated India based on the state of such non-performing loans.
Apollo Global, which makes direct PE investments in India, also has a separate joint special situations fund under AION Capital that it floated along with ICICI Venture a few years ago.
AION Capital had raised a large $825 million corpus two years ago for India-related deals. Last month it backed management buy-in of GE's Indian commercial finance business.
The PE firm said at the time it was backing Pramod Bhasin and Anil Chawla, former top executives at GE India, for the transaction. Bhasin is a former chief executive of BPO major Genpact while Chawla had quit as the head of GE's commercial finance business in India to form hedge fund DE Shaw's Indian operations a decade ago.
New York-listed Apollo Global has about 950 employees located in 15 offices around the world, including New York, London, Frankfurt, Singapore, Hong Kong and Mumbai. As of December 31, 2015, Apollo had $170 billion in assets under management, including private equity, credit and real estate assets.