49566 - DARP NPL Return

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Summary of Investment Information

Project Number

49566

Company Name

DARP NPL Return

Date SPI Disclosed

May 30, 2025

Country

Brazil

Region

Latin America and the Caribbean

Projected Board Date

Feb 27, 2025

Environmental Category

FI-3 - No Impact

Status

Active

Last Updated Date

Jul 2, 2025

Department

Regional Industry FIG LAC & EUR

Industry

Financial Markets

Previous Events

Approved : Feb 27, 2025
Signed : May 9, 2025
Invested : Jun 9, 2025

Sector

Distressed Assets SPV

Project Description

The proposed project consists of creating a Distressed Asset Recovery Program (DARP) platform to acquire and resolve retail and MSME non-performing loans (NPLs) in Brazil (DARP NPL Return or the Project). IFC will be partnering with Return Capital S.A. (Return Capital, Sponsor or Master Servicer), a master servicer and wholly owned subsidiary of Banco Santander Brasil S.A (Santander Brazil or the Bank).

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	150.0

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 Equity	DARP - Consumer NPLs
Straight Equity	DARP - MSMEs NPL

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

Development Impact

The most significant expected Project-level outcome is the offloading of BRL33 billion (US$6 billion) in face value of retail and MSME NPLs (17 percent of current stock of NPLs in the Brazil) and resolve ~10 percent of the NPLs acquired. Beyond the Project, IFC anticipates that the Project has the potential to promote greater competitiveness in the distressed assets market by demonstrating the profitability of investing in retail and MSME NPLs, as well as the scalability and depth of the distressed assets market across different asset classes.

Financial Additionality IFC’s own account equity: IFC will provide up to US$150 million of straight equity for its own account to the Project, which is a sizable equity investment and will allow Return Capital to share the risk and increase its investment activity in Brazil. Fundraising for DARP projects across EM markets has been challenging. IFC’s investment is even more relevant amid current increased NPL volumes in Brazil. Resource Mobilization: IFC will help to upscale Return Capital’s efforts to be an active player in the NPL market in Brazil and help FIs to offload NPLs from their balance sheet. This DARP SPV will be funded, on a pari-passu basis, with an IFC equity investment of up to US$150 million (50 percent) and up to US$150 million (50 percent) from Return Capital. IFC will be able to claim mobilization on the amount of capital committed by Return Capital. Non-Financial Additionality Knowledge, innovation, and capacity building: As part of the Project, IFC will act as an active partner that will not only contribute financial resources, but also share knowledge and expertise in DA investing given its DARP’s experience across emerging markets and in Brazil. IFC will be Return Capital’s first external investor with an ample global network of DA servicers and investors, which IFC will make available to Return Capital so they can benefit from their knowledge and experience as well. Standard Setting: IFC will work with Return Capital to establish and implement an environmental and social management system (ESMS) related to SME NPL in line with IFC Performance Standards, which should entail the development of E&S risk assessment, mitigation and monitoring procedures for this type of NPLs.

Indicator	Metrics	Comments	Calendar Year 2022	Calendar Year 2023	Calendar Year 2024
Volume of Distressed Loans Acquired	USDMill		Pre-dates IFC investment	Pre-dates IFC investment	Pre-dates IFC investment
Volume of Obligations Normalized	USDMill		Pre-dates IFC investment	Pre-dates IFC investment	Pre-dates IFC investment

E&S Category Rationale / Risks and Mitigation

The Project entails supporting Return Capital to acquire retail related NPLs in Brazil. E&S risks of the project are associated to those of the SPV ’s targeted portfolio, which due to the individual and micro enterprises focus is considered to be low. As such, the Project received an E&S categorization of FI-3. Return Capital will be required to continue to demonstrate commitment to meet the labor standards under PS2, as well as good collection industry practices, and notify IFC in case of any change in its portfolio business that may affect the nature of E&S risks.

An ESMS is not required given the risk nature of this transaction. If Return Capital decides to expand the current focus on retail and MSME NPL portfolios to also invest in NPLs of small and medium-size companies (SME NPLs), IFC will work with Return Capital to develop an environmental and social management system (ESMS) related to such SME NPLs, which should entail the development of E&S risk assessment, mitigation and monitoring procedures for those types of NPLs

Contacts

For Inquiries About the Project, Contact

Return Capital S.A.
[+55 11] 91177-4340
return@returncapital.com.br
Av. Juscelino Kubitschek. 2235, 26º andar. São Paulo, SP 04543011, BR
https://www.returncapital.com.br

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