IFC, a member of the World Bank Group, is partnering with Jive Investments to support the development of the distressed small and medium enterprises (SME) assets market in Brazil. Distressed assets are non-productive assets, including non-performing loans, distressed real estate and legal claims.
IFC is providing $80 million to a co-investment vehicle jointly set up with Jive Distressed Fund III, which will contribute with $240 million. Jive is a servicer and manager that focuses on originating, structuring and servicing distressed assets in Brazil. By acquiring distressed assets, the combined capital of IFC and private investors will provide financial institutions with the liquidity needed to break the vicious cycle through which an economic slowdown and increasing distressed assets discourage new lending. In addition, the invested capital will provide liquidity directly to businesses in financial distress, such as SMEs, by advancing cash flows to them via the acquisition of legal claims and distressed real estate assets.
“This investment is part of a broad credit support policy for Brazilian SMEs and, IFC reinforces its ability to develop a countercyclical investment approach,” says Carlos Leiria Pinto, IFC’s Brazil Country Manager.
“The development of the distressed assets market is a key instrument to increase the credit availability and to reduce distortions in the financial market and to foster economic growth in the country,” says Ariane Di Iorio, IFC’s Chief Investment Officer and DARP1 Global Head. “IFC’s investment will help strengthen small and medium-sized businesses and allow them to face the economic challenges of the pandemic, enabling their business to continue and preserve jobs,” adds Ariane.
“Distressed investors are one of the few that remain in the market during times of great uncertainty. Since the beginning of the crisis, Jive has been active and looking for ways to minimize the impact on the Brazilian market. By investing in projects like this, in partnership with IFC, we generate positive social and economic impacts along with higher returns to our investors”, says Guilherme Ferreira, managing partner at Jive Investments.
With its global experience, IFC has supported Jive in improving its risk management practices. It has actively assisted Jive in establishing and implementing an environmental and social management system. This will help Jive align with industry best practices. IFC also helped the company improve its cybersecurity practices, which is a pressing issue globally.
The project is aligned with IFC’s strategy for Brazil, in particular to reducing financial markets distortions and improving credit availability and allocation. The project is also aligned with IFC’s strategy for the financial sector in Latin America and Caribbean (LAC) as it will provide support to financial institutions and mobilize private sector capital. Furthermore, it will also enable SMEs to resolve their defaulted obligations, helping them grow by increasing their access to finance, and generate the much-needed liquidity for maintaining their businesses as going-concerns.
Since 2007, through its Distressed Asset Recovery Program (DARP), IFC has been supporting the development and smooth functioning of distressed assets market globally and, in particular, in Brazil, since 2010. Since inception, $7.7 billion have been committed or mobilized across regions through DARP —$2.7 billion from IFC’s own account and $5 billion from third-party investors. DARP has had an important role in the Latin America market, where IFC has committed $1.1billion equivalent and attracted an additional $2.3 billion from third-party investors.
