39271 - DCM Patria COF

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Summary of Investment Information

Project Number

39271

Company Name

PATRIA CREDITO ESTRUTURADO FUNDO DE INVESTIMENTO EM DIREITOS CREDITORIOS

Date SPI Disclosed

Nov 9, 2017

Country

Brazil

Region

Latin America and the Caribbean

Projected Board Date

May 19, 2017

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Jun 12, 2021

Department

Regional Industry - FIG LAC

Industry

Funds

Previous Events

Approved : May 19, 2017
Signed : Sep 26, 2017
Invested : Aug 17, 2020

Sector

Other Non-Private Equity Fund

Project Description

The proposed project involves supporting Pátria Investimentos Ltda. (the “Fund Manager” or “Pátria”) by investing in Pátria Crédito Estruturado Fundo de Investimento em Direitos Creditórios (the “Fund” or “Project”), a credit opportunity fund (“COF”). This capital market vehicle will mobilize local and international institutional investors and will provide long-term credits to domestic mid-size companies that are underserved by the local banking sector.

As part of IFC’s Capital Market Development Strategy, the Project has the potential to enhance capital market development in Brazil by channeling more capital flows than in the past from local and international institutional investors into underdeveloped credit markets, enhancing capital market liquidity and extending available credit tenors. The Fund can influence the local industry and set up high standards as well as performances that may consolidate the COFs as an investible asset class for local institutional investors.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	40.0
Equity	10.0

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Loans to Corporates

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

Increase Access to Long Term Finance: The Project will offer alternative sources of financing especially to mid-size companies, which are not be able to get access to adequate funding from local financial institutions. The project is expected to complement IFC current efforts with financial institutions ("FIs") in this market segment. Development of new asset class: The Project will help deepen and strengthen local Brazilian capital markets to the benefit of local mid-size firms. The Fund Manager is committed to raising the profile of COFs in Brazil as a nascent investible asset class for institutional investors, capable of providing portfolio diversification benefits and risk/return enhancement. Job preservation and creation: The Project is expected to support job preservation and creation by supporting the access to adequate long-term funding to mid-size companies, key segment of source of growth and employment in the Brazilian economy.

E&S Standards: IFC has the ability to help the Fund Manager to establish strong E&S standards, in accordance with the IFC performance standards. This is expected to raise the bar for strong E&S and corporate governance practices among local institutional investors. Stamp of approval: IFC's investment in this nascent asset class in Brazil will provide an important "stamp of approval", supporting the successful mobilization of institutional investor capital. Credit Opportunities Funds (COFs) are a recent phenomenon in Brazil. 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 to this asset class and mid-size corporate debt segment.

E&S Category Rationale / Risks and Mitigation

The project consists of an up to US$50 million investment in a structured credit opportunity fund to be managed by Patria focused on long-term corporate loans for Brazilian mid-sized companies. The Fund’s pipeline sectoral breakdown includes FI, services, manufacturing and light utilities. Most transactions are expected to be of medium to low E&S risk, therefore the project has been categorized as FI-2 according to the IFC's Sustainability Framework.

The main E&S risks and impacts of the project derive from the E&S risks associated with the Fund's lending activities, its capacity and systems in place to manage these risks. These risks consist primarily of occupational, health and safety (OHS) related themes for services companies and pollution prevention for utilities and manufacturing. 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. The Fund will be required to develop an ESMS in line with the IFC Exclusion List, Brazilian E&S laws and regulations and the IFC Performance Standards prior to commitment and provide staff training. Category A projects will not be eligible under the Fund investment policy. Patria will also be required to hire a qualified external consultant to assess the E&S risks of applicable transactions and to submit the first three E&S Due Diligences conducted prior to investment, as well as a periodic report to IFC.

Contacts

For Inquiries About the Project, Contact

Patria Investimentos Ltda
Alexandre Coutinho
Director
+55 11 3039 9000
Alexandre.Coutinho@patriainvestimentos.com.br

http://www.patriainvestimentos.com.br

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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.

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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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Task Title & Description	Anticipated Completion Date
Nominate officers	06/20/2017
Establish SEMS	06/20/2017
Staff Training	08/24/2017

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