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Brookfield plans to invest $1 bn in stressed assets JV with SBI

20 July, 2016

Canada’s Brookfield Asset Management Inc plans to put in about Rs 7,000 crore ($1.04 billion) into a planned joint venture with State Bank of India that will invest in distressed assets, India’s largest lender said on Wednesday.

Brookfield and SBI join a raft of companies looking to invest in stressed assets that the Reserve Bank of India estimates has touched $120 billion, or 11.5% of local banks’ total loans, as corporate borrowers—especially in infrastructure and commodities sectors—struggle to repay debts.

US private equity firm JC Flowers & Co plans to float a joint venture with investment bank Ambit Holdings Pvt Ltd and Kotak Mahindra Bank has launched a $525 million fund with Canada Pension Plan Investment Board to invest in stressed assets. Financial services firm SREI Alternative Investment Managers Ltd and Piramal Enterprises Ltd are also looking to float funds to invest in stressed companies.

International Finance Corporation, the World Bank’s private investment arm and an active investor in India, has set up platforms with Hong Kong-based investment management firm ADM Capital and global alternative investments firm Apollo Global to invest in stressed assets in Asia and emerging markets.

SBI said in a statement that, as per an initial pact signed with Brookfield, the bank will contribute up to 5% of the total investments into stressed assets. The proposed JV may, at a later stage, seek participation from other lenders in the identified assets.

The JV will independently evaluate and invest in stressed assets, and will rely upon Brookfield’s operational expertise to manage recapitalized businesses.

SBI chairperson Arundhati Bhattacharya said the move will enable banks in general and SBI, in particular, to find alternate solutions to deal with stressed assets. Such an approach will be more acceptable to both the lenders and the borrowers in cases where the promoters are unable to infuse funds and lenders are reluctant to take additional exposure, she added.

For the Canadian company, this JV will expand its private equity platform in the country, said Anuj Ranjan, head of Brookfield India.

The announcement comes days after Brookfield closed its largest-ever infrastructure fund that raised $14 billion.

Brookfield invests in India out of its global funds and has struck two deals in the country in the past two years. It acquired some road assets from Gammon Infrastructure Projects Ltd in August last year and bought a majority stake in a string of industrial parks in Delhi-NCR from Unitech group in 2014.

The company had also come in as an anchor investor in Core Infrastructure India Fund Pte Ltd, an India-focused infrastructure private equity fund floated by Kotak Mahindra Group, in 2013. 

Brookfield has about $240 billion of assets under management globally across property, renewable energy, infrastructure and private equity segments. 

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Brookfield plans to invest $1 bn in stressed assets JV with SBI

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