42623 - DCG Vietnam Debt Fund C

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Summary of Investment Information

Project Number

42623

Company Name

DRAGON CAPITAL GROUP LIMITED

Date SPI Disclosed

Apr 15, 2020

Country

Viet Nam

Region

East Asia and the Pacific

Projected Board Date

Dec 17, 2020

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Mar 13, 2026

Department

Regional Industry - FIG Asia & Pac

Industry

Funds

Previous Events

Approved : Dec 14, 2020
Signed : Dec 23, 2020
Invested : Jan 22, 2021

Sector

Other Sector Fund

Project Description

The proposed investment comprises of a 5-year senior loan of up to US$75 million, consisting of (i) an up to US$50 million IFC A Loan from its own account, (ii) an up to US$25 million from IFC acting in its capacity as implementing entity for the Managed Co-Lending Portfolio Program to Vietnam Debt Fund Segregated Portfolio C (“VDeF C” or the “Fund”), a segregated portfolio to be established by Vietnam Debt Fund SPC (“VDeF SPC”), a subsidiary of Dragon Capital Group Limited (“DCG” or the “Sponsor”). VDeF C targets to have a fund size of up to US$120 million. VDeF SPC currently holds two portfolios concentrating in investments in corporate bonds issued by Vietnamese mid and large size private companies.

VDeF C will be established with 25% of the total fund size contributed in the form of equity from DCG itself. In addition to the senior loan, IFC will mobilize up to US$30 million from other investors to the Fund. Through the investment, IFC will support a reputable fund management group with strong in-house capacity to assess Vietnamese local businesses, in contributing to the demand side of the market and facilitate expansion of the supply side through its work with first-time issuers.

Associated Advisory Engagement

N/A

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	50.0
Equity

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

The project will provide the Fund with the needed long-term funding to support investment in corporate bonds issued by private sector companies in Vietnam, through mobilizing from other institutional investors to the Fund contributing to a more diversified investor base of the local debt market; and support the Fund in promoting sustainability bond issuance in Vietnam through capacity building.

E&S Category Rationale / Risks and Mitigation

The project entails an IFC anchor investment in a structured bond fund VDeF C dedicated to investing in corporate bonds issued in Vietnam by Vietnam-based corporates. The fund is a subsidiary of Dragon Capital Group (DCG) with primarily focus on new issuances. The key E&S risks of this project are related to potential exposure to sectors of inherent medium and high E&S risks such as infrastructure, agriculture, small and medium size hydropower, real estate and construction. The fund will not support coal-related activities and higher risk business activities that may include a) involuntary resettlement, b) risk of adverse impacts on Indigenous Peoples, c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage or d) significant Occupational Health and Safety risks. Investments in equity linked instruments, investments in financial intermediaries (other than low risk), large dams as defined by the WCD, large agriculture projects, as well as state owned enterprises will be excluded. The project has therefore been categorized as FI-2 in accordance with IFC's Sustainability Policy. Applicable performance requirements will include the IFC Exclusion List, relevant national E&S laws and screening out sub-projects potentially to be exposed to higher E&S risk of the type contemplated by the IFC Performance Standards.

The main risk of this project, in additional to sectoral focus, is associated with the limited leverage to assess and influence the bond issuers to mitigate E&S risks. The uniqueness of E&S risk management efforts in capital market investments in fixed income instruments pertains to proper selection of assets upfront. In general, the Fund manager will not have bilateral relationships with project sponsors of assets to be supported through bond issuances. Therefore, the Fund manager will neither have the ability to require any specific E&S performance improvements nor be in a position to conduct assessment of E&S risks at the asset level. The Fund manager will have access to information provided by bond issuers to all investors - the offering circulars specifically disclose information for the investors to use in their purchase. The E&S due diligence process to be conducted by the Fund manager will be based on verifying publicly available information, in addition to information provided in circulars and finalized by applying special filters such as excluded activities and consistency with the key objectives of the Performance Standards.

Summary of Client Environmental and Social Management System (ESMS)

DCG has developed and implemented an Environmental and Social Management System (ESMS) outlining the procedures, responsibilities and tools for undertaking E&S risk management in compliance with the applicable performance requirements. The key potential impacts, which the DCG’s ESMS is designed to identify and avoid include among others poor labor practices; health and safety; significant pollution incidents; life and fire safety; large scale physical resettlement; commercial logging in primary moist forest, and harvesting of wild fish populations; impacts on Indigenous Peoples and cultural heritage. The ESMS will screen projects to establish the E&S performance of the investee company using a checklist aligned to the Performance Standards.

Contacts

For Inquiries About the Project, Contact

Dragon Capital Group Limited
Ms. Quyen Duong Do
Head of Private Capital
+84 28 3823 9355
quyenduong@dragoncapital.com
1501 Me Linh Point 2 Ngo Duc Ke Street, District 1, Ho Chi Minh City, Vietnam
www.dragoncapital.com

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