HDFC, WL Ross set up $100 m overseas corporate recast fund

Mumbai, Oct 26 | Updated: Oct 27 2005, 07:02am hrs
WL Ross & Co LLC, one of the world's leading private equity investors in corporate restructurings, and Housing Development Finance Corporation (HDFC) have teamed up to float a $100 million overseas fund, which will invest in domestic corporate restructurings and turnarounds.

Both the companies are forming an overseas asset management company, which will manage this fund. HDFC will pick up 19.9% in the joint venture, which will be primarily managed by WL Ross. The partners are yet to decide on the location for the registration of the company. The choice of location will depend on the tax treatment the company receives to manage its business.

''The fund will be a kind of private equity and will invest in broad range of companies. It will provide management support and would help the company to go public at a later stage,'' said an official of HDFC. The fund will exit the company once it turns healthy.

Corporate restructurings and turnarounds involve companies facing special or distressed situations. These situations could include corporate restructurings, bankruptcy, reorganisations, corporate spin-offs, privatisations, illiquid secondary stakes, cross-holding stakes and non-performing assets or loans (NPAs or NPLs).

Securities acquired by investors contemplating a restructuring generally include debt, equity and equity-linked and other instruments issued upon reorganisation. Wilbur L Ross, Jr, chairman and CEO of WL Ross, has experience in corporate restructurings across the globe as both an advisor and principal. Over 25 years prior to 1997, when he became a principal investor, Mr Ross acted as financial advisor on more than $200 billion of corporate restructurings.

Mr Ross said in a statement: "India's distressed debt market is unusual in that there are tens of billions of dollars of distressed loans in an economy that is growing at more than 7% per annum. India has new restructuring laws, a well-developed legal system and political will to implement Basel II. "

Ranjeet Nabha, the WL Ross managing director responsible for WL Ross' affairs in India said: "India has the largest non-performing assets market in Asia, after Japan and China. Increased loan loss provisioning by Indian financial institutions cushions them from the impact of non-performing assets, but these assets need to be acquired and restructured to allow these companies to thrive and grow. "