World Bank investment arm International Finance Corporation (IFC) and US-based private equity firm Apollo Global Management are planning to set up a $1 billion distressed assets vehicle to invest in emerging markets globally, according to an IFC filing.
The transaction will consist of a debt and equity investment of up to $500 million from IFC, while Apollo will put in the remaining $500 million.
It will enable financial institutions to offload their non-performing loans, strengthen their balance sheets, free up capital and generate liquidity to fund new loans.
It is expected that one of the target markets will be India, where institutions have a total of nearly $130 billion of bad loans, according to data from the Reserve Bank of India. In 2014, Apollo and ICICI Venture partnered up to establish AION Capital Partners, a $825 million vehicle that invests solely in special situation opportunities in India. US investment firm TPG is eyeing a stake in Indian owned state-lender IDBI Bank, while KKR recently acquired a majority stake in Mumbai-based International Asset Reconstruction Company.
Firms have similarly been attracted to China, whose total debt – the sum of government, corporate and household borrowings – rose to 237 percent of its gross domestic product or close to $27 trillion of domestic and foreign debt as of the end of March.
In January 2016, KKR formed a joint venture with China Orient Asset Management to invest in distressed assets in China. Los Angeles-based Oaktree Capital Management had also previously teamed up with one of China’s bad debts management firm China Cinda Asset Management for distressed assets.
Apollo has over $170 billion in assets under management across private equity, real estate and credit funds.
IFC has invested over $5 billion across 270 funds. It had recently announced plans to commit $40.6 million to Indian private equity firm Multiples Alternate Asset Management’s second fund to invest in consumer, healthcare, logistics and IT firms, as reported by Private Equity International.