32993 - Gavea Credito

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Summary of Investment Information

Project Number

32993

Company Name

Gávea Crédito Estruturado Fundo De Investimento Em Direitos Creditórios

Date SPI Disclosed

Jan 31, 2013

Country

Brazil

Region

Latin America and the Caribbean

Projected Board Date

Dec 14, 2012

Environmental Category

FI-1 - Significant

Status

Completed

Last Updated Date

Nov 30, 2016

Department

Regional Industry FIG LAC & EUR

Industry

Financial Markets

Previous Events

Approved : Dec 14, 2012
Signed : Dec 17, 2012
Invested : Jan 21, 2013

Sector

Distressed Assets

Project Description

The Project supports Gávea Credito Estruturado’s plans to launch an innovative investment vehicle to provide long-term financing for middle market Brazilian firms in need of financial restructuring and without access to the capital markets, promoting (i) competition and innovation by introducing an innovative financing vehicle into the Brazilian market and (ii) capacity-building with a leading alternative asset management firm that can be followed as an example to future deals in other Latin American markets.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	19.03
Equity	9.52

Development Impact

Dissemination of E&S standards: IFC''s participation in this project would support a leading Brazilian asset manager with the capacity to implement and promote good environmental and social standards for the corporate sector in Brazil. Furthermore, given that the GÃ¡vea Group is a standard setter in Brazil in many respects, the potential replication effect may be significant, leveraging IFC''s market impact.

Access to Finance and turnaround: IFC will facilitate the restructuring and refinancing of financially stressed middle market companies, keeping assets in productive use, as well as providing much needed liquidity and risk capital for the local marketplace. In addition, GÃ¡vea Credito''s involvement with a client through the Fund can immediately improve the financial profile of the company and in and of itself provide a stamp of approval, opening up access to other lenders and investors.

Job preservation: As IFC has learned from similar DARP projects in Europe and Asia, as well as from the turnaround and restructuring of its own portfolio companies (especially during the Asian and Argentine crisis), a major consequence of resolving special situations is saving and eventually creating jobs, which carries significant and positive benefits. Based on the current pipeline of companies in the Fund''s pipeline, the Project could preserve thousands of jobs and lead to the creation of many more in Brazil.

International Best Practices: IFC''s participation in the Project, coupled with a strong package of turnaround guidelines, would provide a model for creating a special situations resolution mechanism and can promote best practices in local markets in Brazil and Latin America.

E&S Standards - IFC has the unique ability to help the Company develop and implement strong E&S Standards and practices, in accordance with the IFC Performance Standards, assisting with the development of proper E&S policies and risk management systems.

Knowledge and Innovation - The Project will support the development of expertise for handling corporate special situations in Brazil and Latin America, which will be an important area of the capital markets as the Brazil and the region attempt to deal with the effects of the global economic situation, including rising non-performing loans and stricter capital requirements in the banking sector.

Stamp of approval - IFC''s investment in the Fund will provide an important "stamp of approval" for the Company and the asset class with the potential of leading to other funds of its kind in the country and/or the region. IFC presence in this segment will help in raising funding from international investors for successive funds of this type. Appetite from other international investors is constrained by: (i) lack of transparency in the resolution processes of distressed assets and (ii) a focus on the acquisition of pools of distressed consumer loans as opposed to single asset resolution, which is often perceived as too sophisticated or complicated.

E&S Category Rationale / Risks and Mitigation

The project entails an investment in the first fund offering of Gavea Credito Estruturado, the credit investment arm of Gávea Investimentos. The project intends to provide structured, long-term credit to Brazilian companies (sales of US$250 to 500 million), many of which have no access to long term debt. The Fund’s pipeline sectoral breakdown includes Agribusiness,, Real Estate (Construction and Engineering), Steel, Energy and Chemical/Petrochemical companies. Most investments would be expected to be of medium to high E&S risk, as such the project is categorized as FI-1.

The main E&S risks and impacts of the project derive from the E&S risks of the Fund''s lending activities, the capacity and systems in place to manage these risks. At present the Fund does not have an Environmental and Social Management System (ESMS) outlining the procedures, responsibilities and tools for undertaking E&S risk management of its lending activities and E&S related due diligence is not yet part of its review process. No staff/department has been assigned responsibility for E&S due diligence and monitoring, and training needs to be provided to all staff involved in ESMS implementation.

Contacts

For Inquiries About the Project, Contact

Gávea Investimentos
Rua Jerônimo da Veiga, 384 - 11th floor - São Paulo - Brazil
Telephone: 55 11 3526-9100
Fax: 55 11 3526-9101

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IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

IFC complaint response is separate from and complementary to IFC’s clients’ project level grievance mechanisms and IFC’s Independent Accountability Mechanism (CAO). Lodging a complaint directly with IFC does not, at any time, restrict access to CAO.

Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

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CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

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