DAVOS-Italian non-performing loans yielding healthy returns - Investcorp
By Divya Chowdhury and Aaron Saldanha
Jan 23 (Reuters) - Non-performing loans (NPL) bought from Italian banks and held on average for two years have yielded net percentage returns in the mid-teens, Hazem Ben-Gacem, co-chief executive of alternative asset manager Investcorp said on Thursday.
Ben-Gacem also told the Reuters Global Markets Forum that he hopes to build on a new $130 million fund providing so-called last-mile financing for developers in India's troubled real estate sector.
Below are excerpts from the interview, conducted on the sidelines of the World Economic Forum's annual meeting in Davos, Switzerland:
Question (Q) - Investcorp's latest quarterly update https://www.investcorp.com/docs/uploads/credit-ratings/Q1FY20_Shareholder_Update.pdf mentioned large inflows into the Italian NPL II product. Can you please run us through your process of evaluating investments for this product?
Answer (A) - In Italy, we identified the need for many of the major local banks to trim down their credit exposure and perhaps dispose of non-performing loans.
These are positions that we can then take our time to monetize and generate healthy returns for our investors out of. Returns on average on the Italian NPLs we have have been generating mid-teens net returns with an average portfolio hold of about two years.
Q - This month, you announced a $130 million investment in India's affordable housing market. How aggressively will you add to that sector and which cities are you focusing on?
A - Our investment vehicle will look to provide last-mile financing for real estate developers. Today, there is a real estate credit crunch in India. We are seeing many interesting developers who are stuck at the final stage of their real estate projects.
We provide them with the financing to complete their project and start collecting income from the unit sales. The initial vehicle is $130 million in size. I hope we will build on this real soon.
Q - You recently launched a $500 million Asia food sector fund. How is that doing and what sub-sectors do you see Investcorp using that capital to invest in?
A - This is very exciting ... (it is) one of the largest and most resilient sectors in the Asia market. The fund will focus on condiments and the snacking sector, investing in local businesses throughout Asia for the purpose of support their expansion in the Chinese market.
We do that through our fund partner, China Resources, the largest food distributor in China. We have just launched. Reception so far from investors has been strong. Over the coming months I hope that we will start to make some interesting investments.
(This interview was conducted in the Reuters Global Markets Forum, a chat room hosted on the Eikon platform. Sign up here to join GMF: https://refini.tv/2LbSKPl ) (Reporting by Divya Chowdhury in Davos and Aaron Saldanha in Bengaluru; Additional reporting by Saaed Azhar in Dubai; Editing by David Clarke)
