38692 - DARP APS 2

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Summary of Investment Information

Project Number

38692

Company Name

APS INVESTMENTS SARL

Date SPI Disclosed

Apr 2, 2018

Country

Eastern Europe Subregion

Region

Europe

Projected Board Date

May 30, 2018

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Oct 26, 2018

Department

Regional Industry FIG LAC & EUR

Industry

Financial Markets

Previous Events

Approved : Jun 4, 2018
Signed : Jun 15, 2018
Invested : Oct 24, 2018

Sector

Distressed Assets Servicer

Project Description

The proposed project consists of an investment program with a regional partner-servicer to support the acquisition and resolution of distressed assets in Europe & Central Asia (“ECA”). IFC proposes to become an anchor investor in a regional distressed asset resolution platform (“the Platform”) as well as to take a minority equity investment in a regional distressed asset servicing and asset management company. Accordingly, the Project represents a further step in IFC’s programmatic response to develop a regional resolution mechanism for the high stock of NPLs in ECA.

Through the proposed project, IFC will play an important role in i) mobilizing capital from the private sector, ii) supporting the development and application of best practice distressed asset resolution techniques across the ECA region, iii) supporting banks in IFC countries of operation to restructure their balance sheets in the aftermath of the financial crisis, and iv) providing liquidity for new lending into the economy.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	116.79
Equity	7.88

Development Impact

Stakeholder Impact: IFC anticipates that the project will support banks in IFC countries of operation in ECA to rehabilitate their balance sheets, reduce their NPL ratios and cure the high volumes of distressed assets built up in the aftermath of the financial crisis. In addition, the project will provide extra liquidity to vendor banks which can be used for new lending into the economy. Moreover, the project is expected to assist over-indebted small and medium sized enterprises ("SMEs") and consumers to become free of debt and to regain access to the formal economy. Market Competitiveness: The project will be an important catalyst in developing capacity and best practice for distressed asset resolution across the ECA region. Resilience: IFC expects the project to result in lasting systemic improvements to the distressed asset market in ECA. The project will have a demonstration effect for the market for portfolio sales. A strong secondary market serves as a stabilizing factor in financial systems, giving banks a way to re-allocate capital towards more productive assets.

Mobilization: IFC intends to be the anchor investor for the Platform. IFC's involvement not only provides liquidity for distressed asset investment in ECA but also aims to facilitate mobilization and fund raising from other private sector investors. Knowledge, Expertise and Innovation: The proposed project will support a regional distressed asset servicing company to further develop capacity and to facilitate the sharing of best practices in distressed asset resolution. Stamp of Approval: IFC's presence will provide comfort to other potential private sector investors in the platform as well as to sellers and to regulators as to the transparency of asset pricing and to the development of ethical debt collection practices across IFC's countries of operation in ECA.

E&S Category Rationale / Risks and Mitigation

The proposed project consists of (i) an up to EUR 100 million investment into a regional distressed asset investment and resolution platform in ECA, and (ii) a minority equity investment into a regional debt collection and asset management company. The Platform will target distressed assets in a variety of asset classes ranging from retail unsecured loans to secured corporate exposures. It is expected that the proposed distressed asset portfolios will have limited adverse environmental and/or social risks or impacts. Loans that were provided to support activities on IFC Exclusion List, coal projects as well as projects with unresolved significant environmental and social risks and issues, including involuntary resettlement, adverse risks or impacts on indigenous people, or significant risks or impacts on community health and safety, occupational health & safety, biodiversity or cultural heritage (higher risk transactions) will be excluded from pools of distressed assets to be acquired by the platform and serviced by APS. As a part of the Project, APS will make best efforts to phase out IFC Exclusion List activities and high risks projects from its existing portfolios, if identified or develop mitigation plans for such projects. Therefore, this project was categorized as FI-2 accordance with the IFC's Sustainability Policy.

The key environmental and social risks and impacts of the Project are linked with the partner's capacity to screen the pools of distressed assets against the IFC Exclusion List and the list of higher risk transactions, and to develop and operate sufficient procedures to exclude ineligible distressed assets upfront. As part of the Project, APS will upgrade its environmental and social procedures to: (i) include eviction policy provisions, emergency preparedness & response plans and external grievance mechanisms (ii) improve its environmental and social checklist in order to identify and exclude high environmental and social risk transactions at the due diligence phase as well as phase out high risk projects and excluded activities from its existing portfolio if identified; and (iii) specify monitoring procedures for 3rd party servicers. In addition, the partner will be required to provide regular environmental and social reports on the composition of its distressed asset portfolios to IFC.

Contacts

For Inquiries About the Project, Contact

APS Holding a.s.
Antonín Pfleger
COO, Member of BoD
+420 225 377 450
apfleger@aps-holding.com
Celetná 988/38, 110 00 Praha 1, CZ
http://global.aps-holding.com/

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Task Title & Description	Anticipated Completion Date
Staff Training	04/16/2018
Upgrade ESMS	04/02/2018
Portfolio review	04/16/2018

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