(Repeats to additional subscribers)
* IFC teams with U.S. firm to buy E. European toxic assets
* IFC, Varde Partners to invest up to 450 mln euros
* IFC chief says aims to kick-start bank lending
(Adds quotes, details, background)
By Lesley Wroughton
WASHINGTON, Jan 21 (Reuters) - The World Bank's private
sector lending arm said on Thursday it will join Varde Partners,
a U.S.-based investment advisory firm, to invest up to 450
million euros to buy distressed assets from banks in Eastern
Europe to help the region's recovery.
The head of the World Bank's International Finance
Corporation, Lars Thunell, told Reuters in an interview that
taking bad loans, or toxic assets, off of banks' balance sheets
would help kick-start lending to small and medium-sized
companies in a region still struggling to pick itself up from
the financial crisis.
Thunell said IFC's board on Thursday approved up to 100
million euros for the project, while Minneapolis-based Varde
would make available up to 350 million euros.
Together with Varde, Thunell said IFC would look at
opportunities to buy pools of distressed assets, which are
mainly small and medium-sized enterprises.
Varde specializes in alternative investments, with expertise
in credit, distressed and special situation investing.
Thunell said the venture was part of broader efforts by IFC
to help developing countries cope with the impact of the
financial crisis, which has constrained credit flows and hurt
world trade.
"If we are going to get a good recovery for the jobs sector,
already an overarching issue for every government, we have to
get the small and medium enterprise financing going again where
the bulk of people are employed," he said.
This is the second effort IFC has undertaken this year to
deal with toxic assets in Eastern Europe. Earlier this month
IFC, together with the European Bank for Reconstruction and
Development, teamed up with Vienna-based CRG Capital to raise
some 200 million euros to buy or invest in corporate distressed
assets.
Thunell said IFC's investment would help mobilize more
funding for Eastern Europe. "The mobilization effect from the
100 million we're putting in is tremendous and that is exactly
the role we should have in connecting people who don't know each
other," he said.
Thunell said once Varde had identified assets, it would
contract with a local service provide to manage them. IFC would
act as the middleman by helping to mobilize financing and
putting companies in touch with each other.
"Obviously, bringing in other private sector money this has
to be a business proposition...you have to make money somewhere
in it," he said.
Asked whether IFC and Varde were already eyeing assets
Thunell said: "There have been feasibility studies and
preliminary discussions. You have to figure out whether it makes
sense.
"We're trying to move as quickly as possible and obviously
there have to be discussions and the selling bank has to
convince their boards this is the right thing," he added.
Top U.S. and European banks have lost more than $1 trillion
on toxic assets and from bad loans since the start of 2007,
according to the International Monetary Fund. See Factbox
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Asked who would value the assets of Eastern European banks,
Thunell said: "Before we worry about that, let's get it up and
running. There are methodologies on how to do these things and
that is where Varde comes in."
Thunell is no newcomer to the problem of distressed assets.
He successfully oversaw Sweden's "bad loans" bank Securum, a
repository for toxic debt that came out of 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.
(Editing by Leslie Adler)
