Canada Pension to invest $450 mn in stressed assets market

In a first by a global institutional investor, the Canada Pension Plan Investment Board (CPPIB) today committed USD 450 million to invest in stressed assets market, along with Kotak Mahindra Group's asset reconstruction company (ARC).

"The current environment has created a much larger opportunity that requires significant capital commitment," Kotak Special Situations Credit Fund's chief executive S Sriniwasan said.

He said the Kotak Group is committing its own USD 75 million and the total amount of USD 525 million will be invested by the fund in the asset reconstruction space, which has witnessed greater attention recently.

Sriniwasan explained that the money will be invested along with the group's existing existing ARC, Phoenix.

"Phoenix has the skillsets to run the business, which includes doing the due diligence and recovering the money," Sriniwasan told PTI.

Phoenix will invest 15 percent cash component which an ARC has to invest upfront as per the existing laws on sale to ARCs through the security receipts, while the fund will invest the rest, he said, adding this has the potential to fasten the distressed assets resolution process.

"The ARC industry has limited capital and there is an urgent need for substantial capital to buy non-performing assets from banks, as and when these loans get sold at fair value," Phoenix's chief executive Eshwar Karra said.

He further said the fund, which will work along with Phoenix, comes with a flexible mandate and will help address capital needs of both borrowers and the selling lenders.

He said the committed fund will flow in over the next three years and overall window for the fund is 7-8 years.