33968 - Commercial Intelligence

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Summary of Investment Information

Project Number

33968

Company Name

Commercial Intelligence Funds Group

Date SPI Disclosed

Jun 26, 2014

Country

Middle East, Pakistan, and Afg Region

Region

Middle East

Projected Board Date

Aug 20, 2014

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Nov 30, 2016

Department

Regional Industry FIG MCT

Industry

Financial Markets

Sector

Distressed Assets SPV

Project Description

The proposed Project consists of establishing the first Distressed Asset Recovery Program (“DARP”) facility and servicing platform in MENA, to support the acquisition, financing, guaranty & resolution of corporate and small, medium enterprises (“SME”) Non Performing loans (NPLs). The platform will help (i) build capacity to successfully operate in this business, (ii) ensure the use of appropriate NPL resolution practices and the alignment of interest amongst partners, and (iii) contribute to the financial stability of the region, which has been substantially impacted by the recent regional political crises.

IFC will co-invest with the Commercial Intelligence Funds Group (“CIFG” or the proposed DARP partner), having substantial experience in investing and servicing NPLs in emerging markets), in a CIFG managed Master SPV. IFC will also invest in the MENA NPL Servicer, which shall facilitate the servicing of the acquired NPLs across MENA countries focusing on Pakistan, Egypt, and Lebanon.

Sponsor / Cost / Location

Development Impact

The expected developmental impact from this project are high. Specifically, the project is expected to encourage:
1. NPL sellers, buyers, and servicers to enter the MENA market, thereby helping develop the market.
2. The adoption of insolvency standards, creditors'' rights and collection practices for the efficient resolution of NPLs.
3. the development of a new mechanism to execute NPL transactions at their market value, thereby encouraging other market participants to replicate the Project.

IFC''s additionality through this project is multi-pronged, and consists of: i) enabling CIFG to leverage of IFC''s experience in MENA to source NPLs from IFC''s network banks and to obtain support for NPL removal from local regulatory authorities, ii) playing a counter cyclical role by providing an incentive to banks to remove NPLs created through the economic slowdown in MENA owed to regional and global fiscal and monetary conditions, iii) encourage the adoption of best practices in NPL resolution in MENA, through the use of litigation and the rule of law as the primary recovery technique, and lastly iv) help develop an efficient market for buying and selling NPLs and, thus, promoting liquidity and stability in the financial markets in MENA.

E&S Category Rationale / Risks and Mitigation

This project will support the creating of a servicing capacity to resolve commercial NPLs in banks in Middle East and North Africa. The project will support the corporate and SME debtors in various sectors and sizes, however, most are likely in liquidation and not operational. As NPLs of single creditors are the target assets, large corporate NPLs with multiple creditors are expected to be fewer. Considering that some companies can be or could have been in higher E&S risk sectors or engaged in higher E&S risk activities (e.g. oil, gas, mining; agri-commodity related businesses with high biodiversity and labor concerns) that the project may not be able to address, some reputational risk remains. This project has been classified as a FI-2 Project in accordance with IFC Sustainability Framework.

The project will require that CIFG (i) develops and implements an Environmental and Social Management System (ESMS) to screen out the assets against the IFC FI Exclusion List and any unresolved significant social and environmental issues or high risk projects; (ii) identifies responsible, qualified persons to manage and implement the ESMS; and (iii) submits a periodic report to IFC as per a format to be provided by IFC. CIFG will also be required to submit the three environmental and social due diligence information to ensure the satisfactory implementation of the ESMS. While it is not likely, if the project supports ongoing restructuring of debtors, CIFG will use its best efforts to work with the debtors towards the compliance with relevant national environmental, health, safety, and labor laws and IFC Performance Standards, as applicable.

Main Environmental and Social Risks and Impacts of the Project:
The key E&S issue associated with this project will be the capacity of CIFG, a new IFC client, to identify and manage the E&S risks associated with the NPLs. Considering that corporate and SME debtors in financial difficulties might also have difficulties in ensuring compliance with EHS and labor laws, adequate engagement with external stakeholders and/or the resolution of outstanding E&S issues, the project may be exposed to reputational risks from unaddressed E&S concerns

Contacts

For Inquiries About the Project, Contact

Mr. Michael Shone
Chairman – Commercial Intelligence Funds Group
25 Duxton Hill, #03-01
Singapore 089608
Email: mailto:mshone@cifundsgroup.com
Tel: +65 6303 9788
Fax: + 65 6303 9789

Mr. Mateen Beg
Chief Executive Officer – CIFG Makeen Capital Limited
Office 1002, Liberty House, DIFC
Dubai, U.A.E
Email: mailto:mbeg@cifundsgroup.com
Tel: +9714 4 4296020
Fax: +9714 4 4296021

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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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Task Title & Description	Anticipated Completion Date as Disclosed in the SII
Nominate officers	9/30/2014
Establish SEMS	9/30/2014
Staff Training	9/30/2014

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