The European Bank for Reconstruction and Development (EBRD), World Bank Group member IFC and The Netherlands Development Finance Company (FMO) have joined up with Asia Debt Management Hong Kong (ADM Capital) to establish a regional fund to invest in midsize companies facing financing difficulties due to financial crisis.
The ADM CEECAT Recovery Fund, targeting Central and Eastern Europe, Central Asia, and Turkey (CEECAT), will help the region recover from the crisis by supporting companies that represent a major source of jobs and significantly contribute to economic development.
EBRD, IFC and FMO will invest EUR60m, EUR35m and EUR15m respectively in the targeted EUR300m ADM CEECAT Recovery Fund, which will be managed by ADM Capital. With a total of over EUR170m committed so far from the international finance institutions (IFIs), pension funds, endowments and private wealth offices, the financing from IFIs has played a major role in securing additional funding from the private sector.
The fund’s investments will focus on rehabilitating operationally strong but financially distressed companies via restructuring, rescheduling, refinancing, debt-equity swaps, liquidity management. It also will fund growth opportunities where alternative sources of capital are not available. The fund will initially target companies in Kazakhstan, Romania, Turkey and Ukraine with loans and equity investments of between EUR10-30m.
Robert Appleby, one of the founding partners of ADM Capital, said: “The fallout of the recent financial crisis in this region has created an environment where ADM Capital’s style of investing can flourish. Many of the issues faced by companies operating in the CEECAT region have strong parallels with issues faced by companies in Asia post the 1998 crisis.”
Varel Freeman, first vice president of EBRD, said: “The EBRD’s investment in the fund is a commercial response to the growing number and volume of distressed assets and nonperforming loans in its countries of operations which cannot be addressed by local institutions alone. The EBRD is delighted to be working with ADM Capital and the other IFIs with the aim of having a positive stabilizing impact on the businesses of the investee companies, increasing job opportunities in the longer term, and helping achieve sustainable economic development.”
Yvonne Bakkum, director of private equity at FMO, said: “In order to sustain our strong relationship with ADM Capital and based on the good track record of this fund manager, we will invest for the third time in a fund which is being managed by ADM Capital. Particularly, the fact that the fund enables financially distressed companies to get the opportunity to de-leverage their balance sheet, induce managerial and operational improvements and become economically viable again, has a high development impact.”
Lars Thunell, executive vice president and CEO of IFC, said: “We’re delighted to work with ADM Capital, EBRD, and FMO on the debt and asset recovery program’s third investment in Europe and Central Asia. By supporting strong companies facing funding difficulties we can help maintain jobs and production, contributing to the overall economic stability of the region.”