IFC to invest $100 million in JC Flowers’ India distressed assets fund

International Financial Corporation (IFC), a member of the World Bank Group, is partnering with JC Flowers & Co to help financial institutions in India resolve distressed assets, an initiative that will free up  capital for new lending and allow mid-sized Indian firms to preserve jobs and avoid insolvency, according to a press statement issued by IFC. 

Under the project, an expansion of IFC’s Distressed Asset Recovery Program’s (DARP) work in India, IFC will invest up to $100 million in the JC Flowers India Opportunities Fund if certain conditions are met, with an initial commitment of $40 million. The Fund is a partnership with Eight Capital Management, an Indian distressed assets investment firm. 

The press statement by IFC said that the COVID-19 crisis has devastated the global economy, spurring an increase in non-performing loans, which can threaten financial stability, undermine the supply and pricing of credit, and reduce investment. It added that India has introduced multi-pronged regulatory and prudential measures to mitigate the impacts of the pandemic. However, the Reserve Bank of India estimates that a second wave could potentially cause non-performing loans to reach $200 billion—nearly 15% of gross loans—by September 2021. 

This partnership aims to support an inclusive economic recovery and revitalization of India’s economy, promote credit growth, and ensure the continuity of hardest-hit businesses and livelihoods. 

“Across the globe, the COVID-19 pandemic has dealt a blow to companies’ ability to repay their debts, and increased already soaring pre-crisis corporate debt levels,” said Alfonso Garcia Mora, IFC Vice President for Asia and Pacific. “By helping create a functioning market for distressed assets, this initiative will let viable Indian firms return more quickly to productivity, limit the movement of solvent firms into bankruptcy, and allow banks to return to their core lending business in support of medium and small enterprises. Together with our partners, IFC remains committed to supporting India’s efforts to restore economic growth and stabilize the financial system.” 

The new partnership will create the first dedicated platform in India for mid-sized distressed assets, which account for $27 billion—more than a third—of the country’s corporate distressed assets. Despite increasing demand for corporate resolution, the mid-sized segment is underserved due to a lack of large transactions and the challenges investors face in identifying attractive opportunities. As a result, resolution efforts have focused on large corporates.

In addition to its investment, IFC will support J.C. Flowers and Eight Capital in the adoption of environmental and social standards in line with the IFC Performance Standards.

IFC’s DARP focuses on the acquisition and resolution of distressed assets, the refinancing and roll-over risk of viable entities, and the restructuring of small and medium-size enterprises. Since it was established in 2007, DARP has committed $7.7 billion globally, including the mobilization of $5 billion. This has enabled banks to offload over $33 billion of non-performing loans, while helping over 18 million debtors resolve their obligations.

IFC, a member of the World Bank Group, is a global development institution focused on the private sector in emerging markets. It works in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2020, IFC had invested $22 billion in private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity. 

Also read: India offers $150 billion stressed assets market for foreign funds