The Hindu Business Line : HDFC to advise WL Ross AMC on investment in corporate turnarounds

HOUSING Development Finance Corporation will partner global private equity investor WL Ross & Co LLC to manage the latter's dedicated fund for investment in Indian corporate restructurings and turnarounds.

This fund, arguably the first of its kind for India, will be entirely an overseas fund in which HDFC will not invest.

HDFC's role will be advisory as joint venture partner in the AMC that will manage the fund.

The Indian company's 19.9 per cent stake in the AMC will be a `small-cap' affair, the outfit being only thinly capitalised. The rest of the equity stake will be held by WL Ross & Co, said an official from HDFC. The AMC will be located overseas as well.

"India's new restructuring laws, a well developed legal system and political will to implement Basel II," were factors that led Ross to see opportunity here, said Mr Wilbur L. Ross Jr, Chairman & CEO of WL Ross.

HDFC will get a share of the income from managing the fund. There is another profitable opportunity for the HDFC group from this association, is that it could "co-invest" in the investments made by the fund, said an official from HDFC.

"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 cent per annum," according to Mr Ross Jr (who is also on the board of directors of Mittal Steel).

"The WL Ross team has extensive experience in the global turnaround arena and we look forward to working with them in this endeavour," said Mr Deepak Parekh, Chairman, HDFC.

"India has the largest non-performing assets market in Asia, after Japan and China," said Mr Ranjeet Nabha, WL Ross' Managing Director responsible for WL Ross' affairs in India.

"Increased loan loss provisioning by 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. Our entry will help broaden India's capital markets and provide the skills necessary to turn these companies around."

Corporate restructurings and turnarounds involve companies facing special or distressed situations, explained the news release from HDFC. These situations could include corporate restructurings, bankruptcy, reorganisations, corporate spin-offs, privatisations, illiquid secondary stakes, cross-holding stakes and non-performing assets or loans.

Securities acquired by investors contemplating a restructuring generally include debt, equity and equity-linked and other instruments issued upon reorganisation, it said.

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