36038 - DARP Secorse Ser

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Summary of Investment Information

Project Number

36038

Company Name

DARP Secorse SPV

Date SPI Disclosed

Jun 3, 2015

Country

Mexico

Region

Latin America and the Caribbean

Projected Board Date

Jul 6, 2015

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

May 5, 2024

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : Aug 7, 2015
Signed : Aug 4, 2016
Invested : Nov 3, 2016

Sector

Distressed Assets Servicer

Project Description

The proposed project consists of an investment in Servicios de Cobranza, Recuperación y Seguimiento, S.A. de C.V. (“Secorse” or the “Company”), the Mexican servicing company of Banco Santander S.A. (Spain) (“Santander”). The project also includes an investment in a Special Purpose Vehicle (“SPV”), yet to be created, funded along with Secorse. The SPV will invest in the acquisition and resolution of non-performing portfolios, to be serviced by the Company.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	20.0
Equity	10.0

Development Impact

(i) Access to Finance and Turnaround: IFC''s current platform''s collection practices significantly increase the likelihood of households to reach appropriate payment agreements, thus avoiding losing their assets, and ultimately re-enter the formal banking system. This significantly contributes to the wellbeing of a large number of households that for one reason or another have faced financial difficulties and therefore have been unable to honor their debts as originally scheduled. Moreover, the successful implementation of the project could spark further interest of other market players and evolve into a common practice. This could evolve into an important stabilization mechanism for Mexican financial system and help IFC to address the current NPLs issues in Mexico;

(ii) International Best Practices: As part of the project IFC would promote international insolvency standards, creditors'' rights and collection practices for the resolution of the distressed assets to be serviced by the Company and acquired by the SPV; and

(iii) Market transparency: Through this project, IFC would be helping different financial institutions in assigning a market value to its DA portfolio. If successful, the proposed project has the potential to be replicated by other entities in Mexico, increasing this way the level of transparency of financial institution''s balance sheets.

(i) Countercyclical role: This transaction will provide IFC the opportunity to play a countercyclical role in the Mexican financial market, allowing financial institutions to dispose of its non-performing assets through a market based mechanism. The latter will positively contribute to the overall stability of the Mexican financial system; and

(ii) Best Practices and Replicability: The transaction could help entice best practices for resolution of non-performing and under-performing assets. At the same time, IFC could replicate this structure to support other large players with similar needs.

E&S Category Rationale / Risks and Mitigation

The project will support an already established NPL servicing company in Mexico through an equity investment in Secorse, and a yet to be established SPV that will acquire and hold pools of non-performing loans. The portfolios serviced by Secorse includes retail (credit cards and mortgages), microcredits, SMEs and commercial NPLs. It acquires and services some portfolios (which are mostly consumer and mortgage NPLs) and service other portfolios for fees for third parties (which include commercial NPLs). In accordance with the IFC Sustainability Framework, the project has been classified as a FI-2 project.

The main E&S risks and impacts are associated with the operations of financially stressed SME and commercial NPLs, such as being non-compliant with local EHS and labor laws. While most of such debtors are not in operations and Secorse does not currently own such NPLs, Secorse has capacity to service such NPLs and it could own such assets in the future. Secorse does not have a specific and procedures to work with operating SME and commercial debtors.Secorse will be required to (i) develop an Environmental and Social Management System (ESMS) to ensure that SME and commercial NPLs are in compliance with IFC Exclusion List, relevant local laws and regulations and IFC Performance Standards, as applicable, (ii) designate an ESMS officer to oversee the implementation of the ESMS, (iii) operate in compliance with IFC Performance Standard 2: Labor and Working Conditions; and (iv) submit annual environmental and social performance reports.

Contacts

For Inquiries About the Project, Contact

Isabel Alvarez
Bosque de Duraznos No. 61, Piso 12 - A
Col. Bosque de las Lomas
Del. Miguel Hidalgo, C.P. 11700
Mexico, D.F.

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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	05/29/2015
Establish SEMS	05/29/2015
Staff Training	05/29/2015
Establish an internal grievance mechanism for its employees and third party hired workers.	07/28/2015

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