New fund to buy toxic assets in Eastern Europe


The World Bank, the European Bank for Reconstruction and Development and fund manager CRG Capital said today (11 January) they had launched a fund to buy toxic assets in Central and Eastern Europe hit by the global financial crisis.

The CEE Special Situations Fund will raise some 200 million euros to buy or invest in corporate distressed assets in the region to aid its recovery from deep recession, the World Bank’s private-sector lender, the International Finance Corp, the EBRD and CRG Capital said. 

The groups said they would initially commit 36 million euros to the fund, which will focus on “the acquisition, turnaround and resolution of corporate distressed assets”. 

“By addressing the problem of bad debts, we are helping restore the long-term viability of the regional financial system so that individuals, and small and medium businesses, can gain better access to affordable finance,” IFC chief Lars Thunell said in a statement. 

“The fund will support an established management group that will bring new skills to support the recovery of viable, but struggling, companies,” Varel Freeman, EBRD’s first vice-president, added. 

Last October, IFC launched the Debt and Asset Recovery Programme, or DARP, that will invest directly in companies in emerging markets struggling under the weight of bad debts. It could also invest indirectly via investment funds, such as CRG Capital, that buy up distressed assets and manage them. 

IFC said it would invest about $1.5 billion toward DARP, which it hoped would grow into a $5 billion program that will target emerging and developing countries in Eastern Europe, Asia and Latin America. 

Lars Thunell, IFC’s chief executive officer and executive vice-president, successfully oversaw Sweden’s ‘bad loans’ bank Securum, a repository for toxic debt during the country’s banking crisis in the 1990s. 

Securum was able to restructure and sell distressed assets held by the government, much of them at a profit, once the economy turned around. 

(EURACTIV with Reuters.)

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