CRG Partners:

CRG Partners is a leading middle market turnaround and restructuring firm in the US. The firm has a staff of 100 professionals in the US and Europe. CRG Partners’ heritage in the CEE region dates to 1992 when one of its predecessors – The Recovery Group or TRG – was called on by the World Bank to deploy enterprise restructuring expertise in the early days of the post-socialist economies. CRG Partners and IFC have already worked together during the nineties in Poland in the privatization of three cement plants.

CRG Capital:

CRG Capital is the European subsidiary of CRG Partners and therefore benefits from their resources and turnaround experience. Having successfully worked in virtually all countries of CEE and CIS over the past two decades, CRG Capital is an established and recognized brand name in the region as the leading regional turnaround and restructuring expert, in the financial, investment, and legal communities. CRG has been actively sourcing special situations deals since 1998. As part of its core business, CRG Capital has successfully restructured and monetized distressed and underperforming portfolio assets, including two regional private equity funds. In the past, CRG Capital has also provided services to distressed and underperforming companies in the region including turnaround management, operational restructuring, financial restructuring, interim management, valuation and M&A support, refinancing, recapitalization and acquisition due diligences. CRG Capital’s core team has been working together for the past 10 years throughout Central and Eastern Europe, as well in the US and Western Europe. CRG Capital is the only institutionalized group focusing solely on special situations equity investments in the region.

The proposed investment consists of a EUR21 million equity investment for IFC’s own account.

26.24 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	26.24

* These investment figures are indicative

The proposed project consists of supporting the acquisition and resolution of single corporate distressed assets initially in Central and Eastern Europe and subsequently expanding into other regions.

The development impact of the proposed project is expected to be significant in different layers:

Value to distressed companies:

- Putting collateral assets back into productive use, while avoiding liquidations and preserving and creating value for all stakeholders;
- Deleveraging balance sheets and restructuring debts to sustainable levels; and
- Inducing managerial, operational, and financial improvements, and increasing their competitiveness.

Value to financial markets:

- Providing liquidity and risk capital to the marketplace, which will allow financial institutions to place amount held as collateral back into the system for productive use;
- Cleaning banks’ balance sheets and reallocating resources to productive companies; and
- Developing secondary debt markets.

Value to the business environment:

- Accelerating compliance with environmental & accounting standards, corporate governance;
- Providing investors with risk mitigation, divestment routes, out-of-court resolution;
- Promoting international insolvency standards and creditors'' rights; and
- Creating a positive precedent, knowledge and expertise in the currently under-developed asset class in the region.

In this particular case, IFC role is key for the success of this venture, given:

- the lack of appetite from other international investors as a result of: (i) uncertainty and difficulty in the resolution processes of distressed assets in these countries; and (ii) more specifically, international investors are much more focused in the acquisition of pools of distressed consumer loans, as single asset resolution is usually too sophisticated or demanding in time and effort for this type of investor;

- the expansion to less developed regions. In a second stage the platform will expand towards neighboring countries, where IFC will play a key role through its knowledge of the financial sector and previous restructuring experience;
the counter cyclical role. Through the proposed investment, IFC will help to create additional infrastructure to support the resolution of problem situations that are being derived from the global current financial crisis and liquidity crunch; and

- the current environment. Unprecedented nature of current circumstances, among other things, causing capital flight and threatening to roll back the region’s achievements of the past 10 years.

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. This project involves IFC support for the investment in non-performing assets, and considering the nature of activities supported, the project will be required to:

- Develop a Social & Environmental management system/procedure relevant to its business process, prior to disbursement, that is satisfactory to IFC, that ensures that all its investments are screened and processed to avoid supporting activities on the IFC FI Exclusion List;

- Review information available in the public domain and avoid investments in sub-projects that have substantial unresolved social or environmental issues;

- Commit to work with the assets it is restructuring to ensure that the projects are operating in compliance with Applicable National Environmental and Social Laws and regulations, or have an action plan to achieve the same within a reasonable time frame;

- Demonstrate commitment and resources to implementing the Social & Environmental management system/procedure, and take action to remedy any gaps in implementation on an ongoing basis;

- Submit a periodic report to IFC as per a format to be provided by IFC