35369 - MAV Credit Peru

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Summary of Investment Information

Project Number

35369

Company Name

FONDO HMC CAPITAL HIGH YIELD PERU FI

Date SPI Disclosed

Oct 15, 2014

Country

Peru

Region

Latin America and the Caribbean

Projected Board Date

Nov 17, 2014

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jul 13, 2022

Department

Regional Industry FIG LAC & EUR

Industry

Financial Markets

Previous Events

Approved : Dec 15, 2014
Signed : Feb 9, 2015
Invested : Apr 29, 2015

Sector

Portfolio Management Company

Project Description

The proposed project would involve supporting HMC Capital Peru S.A. (the “Fund Manager”) in raising and structuring HMC Capital High Yield Peru (the “Fund” or “Project”), a credit opportunity fund (“COF”), in IFC’s capacity as a potential investor in the Fund. This capital market vehicle would mobilize local institutional investors to provide financing for local companies through capital markets issuances.

As part of IFC’s Capital Market Development Strategy, the project has the potential to enhance the development of the local debt capital market in Peru by channeling capital flows from local institutional investors into public credit markets for medium-size companies. The Fund will invest primarily in bonds listed on the Peruvian alternative securities exchange (Mercado Alternativo de Valores “MAV”), a platform focused on small- and medium-size companies. The project is expected to enhance capital market liquidity, extending available credit tenors, and supporting further primary issuance of new bonds as well as its secondary market in the country.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	15.0

Development Impact

The proposed Project is expected to have the following development impacts:
- Increase the Access to finance: The project will increase the access to finance to the underserved mid-size corporate sector in Peru. The project is also expected to expand IFC current efforts in this market segment by making medium term funding available to mid-size corporates.
- Job creation: The fund will provide much needed funding to the mid-size corporate sector, key employer in the Peruvian economy. Thus, supporting the fund in turn supports the primary drivers of job creation and growth in Peru
- Local Capital Markets Development: The project will help to develop the local Peruvian debt capital market for mid-size firms. The Fund Manager aims to foster the development of this segment of the local debt capital market, improve best practices, and overall raise the profile of this asset class in Peru.

- Resource mobilization: IFC participation in the project and "stamp of approval" will catalyze local institutional capital into the Fund.
- Demonstration effect: The debt capital market for medium companies is almost non-existent in Peru. IFC''s investment in the fund will have a positive demonstration effect by raising awareness of a higher yielding debt asset class, potentially attracting other high performing managers and investors into this asset class to the benefit of the mid-size corporate debt segment.
- Standard Setting: The Fund will adhere to World Bank / IFC E&S standards and IFC''s funds best practices, which will raise the bar for E&S and corporate governance practices among local institutional investors.

E&S Category Rationale / Risks and Mitigation

The project will support bond purchases, primarily involving new issuances, of companies in a variety of sectors in Peru. The key E&S risks of this project are related to those of the companies issuing the bonds, which operate in a variety of sectors associated with medium to high E&S risks. Since this is a generalist Fund investing in bonds, the overall risk exposure of the portfolio is expected to be moderate, although high risk companies may potentially be supported on occasional basis. The Project has been categorized as FI-2 according to the IFC’s Sustainability Framework.

The main risks of this project are associated with Fund’s investments, in sectors of potentially high E&S risks such as mining, energy, agribusiness, and construction. Although the likelihood that the number of investments in high risk sectors will be sizable is limited, the key potential impacts of these, which the Fund will be required to identify and manage as part of an E&S management system, may include deforestation, soil erosion, and air and water pollution. The Fund will seek to avoid projects involving involuntary resettlement, impacts on local communities and/or indigenous peoples and child labor. Because the Fund will be investing in bond instruments, which have limited leverage compared to loans and equity, its ability to influence these companies to mitigate E&S risks will be comparatively limited. As such, a robust E&S assessment will be required to be in place to avoid investments in companies with poor capacity or commitment to manage E&S risks. The Fund’s assessment will need to determine that all sub-projects are in compliance with the Performance Standards and local laws (or have a satisfactory action plan to come into compliance within a reasonable timeframe) or have been adequately screened based on selected E&S criteria in the case of secondary market transactions. Additionally, IFC will review the implementation and performance of the Fund’s ESMS for the first few sub-projects, prior to the Fund’s investment in them, to ensure that the system is adequate to identify and manage the E&S risks.

Contacts

For Inquiries About the Project, Contact

Mr. Daniel Dancourt
Managing Director – Business Development
HMC Capital Peru S.A.
Av. Manuel Olguin 335, Edificio Link Tower, Off. 1108,
Santiago de Surco, Lima, Peru

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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
Nominate officers	11/26/2014
Establish SEMS	11/26/2014
Staff Training	11/26/2014
Reputation risk screen	11/26/2014

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