46654 - Altum CKD II

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Summary of Investment Information

Project Number

46654

Company Name

CKD RF ESTRUCTURADA S.A.P.I. DE C.V. SOFOM ENR

Date SPI Disclosed

Sep 21, 2022

Country

Mexico

Region

Latin America and the Caribbean

Projected Board Date

Nov 4, 2022

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Feb 15, 2023

Department

Regional Industry FIG LAC & EUR

Industry

Funds

Previous Events

Approved : Nov 28, 2022
Signed : Jan 30, 2023
Invested : Feb 13, 2023

Sector

Other Non-Private Equity Fund

Project Description

The proposed investment consists of two senior secured loans to (i) CKD RF Estructurada, S.A.P.I de C.V. SOFOM E.N.R (“CKD”), an existing client and operating vehicle of AltumCK, and (ii) Fideicomiso Irrevocable de inversion y Pago no. 4909 (“CERPI Trust”), an operating vehicle of AltumPI (together the Funds). The Funds are managed by Legorreta Gomez y Asociados, S.C. (LG&A or the Fund Manager). The proceeds will be used to finance NBFIs and SMEs in Mexico, which have limited access to bank loans. At least 35% of the proceeds will fund climate related activities such as renewable energy (RE), solar panels for households and small businesses, and energy efficient (EE).

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	49.90
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 MSME (mix of Micro and SME)
Straight Senior Loan	Others (only if UoP is not available)
Straight Senior Loan	Loans to MSME (mix of Micro and SME)
Straight Senior Loan	Others (only if UoP is not available)

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

Development Impact

The most significant, expected Project-level outcomes are: (i) an increase in access to finance for SMEs, and (ii) an increase in the availability of climate finance by providing alternative sources of long-term financing to well performing SMEs and NBFIs. The Funds provide direct loans to SMEs and enable NBFIs to on-lend to underserved and constrained SMEs. Beyond the Project-level outcomes, IFC anticipates that the investment will contribute to market creation by improving environmental sustainability by establishing international green lending principles in the climate finance segment. Further, IFC expects this project to demonstrate the commercial viability of climate lending to SMEs and therefore encourage replication through alternative funding channels, such as debt funds.

IFC's additionality through the Project is financial, which will be provided in the form of financing structure. IFC's partnership with Altum started in 2018 and as such, IFC's additionality evolved from providing Altum with technical support to strengthen its operational capacity, to expand its climate-related asset financing. The support for the client continues as this project continues to support the expansion into the climate-related segment.

E&S Category Rationale / Risks and Mitigation

The proposed investment will support Mexican SMEs and non-bank financial institutions (second and third tier) through a senior secured loan of up US$50 m to the operating vehicles of two funds, CKD RF Estructurada, S.A.P.I de C.V. SOFOM E.N.R, an existing IFC client; and Fideicomiso Irrevocable de inversion y Pago no. 4909. The Funds are managed by Legorreta Gómez y Asociados, S.C. (LG&A or the Fund Manager). The Funds' existing portfolio is composed of MFIs and SMEs. Given the Fund's investment strategy, the E&S potential impacts of its portfolio and pipeline are considered to be medium, the project has been categorized as FI-2 according to the IFC's Sustainability Policy. As part of the project, the Funds will be required to assess the potential investments against the IFC Exclusion List, host country laws and the applicable provisions of the 2012 Performance Standards.

The main risks of the Project are associated with the Funds' capacity to assess and manage investments in small and medium Financial Institutions (MFIs) as well as its direct lending to SME companies. Target sectors have medium inherent E&S risks and include microfinance, housing, leasing, manufacturing and tourism, energy efficiency and renewable energy, among others. Potential E&S risks associated with the proposed project include occupational health and safety risks, air and water effluent emissions and labor conditions. Some projects may be required to apply provisions of the Performance Standards, as applicable. As an existing IFC client, the Fund Manager has developed and implemented an ESMS in line with IFC requirements. The Funds will not support activities with significant E&S impacts such as: involuntary resettlement, adverse impacts on indigenous peoples, significant impacts on the environment, community health and safety, biodiversity, cultural heritage or substantial occupational health and safety risks. Additionally, the Funds will not finance Category A activities, companies operating in the coal sector (coal mining, coal transportation, coal-fired power plants, or infrastructure services dedicated to support any of these activities) as well as the conversion or degradation of natural habitats as defined by IFC Performance Standard 6 - 'Biodiversity Conservation and Sustainable Management of Living Natural Resources'.

Contacts

For Inquiries About the Project, Contact

Legorreta Gomez y Asociados, S.C.
Eduardo Legorreta
Institutional Funding Director
+52 55 6721 0996
elegorreta@altumcapital.com.mx
Monte Caucaso 915 Piso 1 Desp. 103, Col. Lomas de Chapultepec, Ciudad de Mexico, C.P. 11000
www.altumcapital.mx

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