Debt-laden companies will benefit from new IFC fund

Debt-laden companies will benefit from new IFC fund

WASHINGTON (Reuters): The World Bank's private sector arm plans to set up a new Asian equities fund to restructure debt- laden corporations caught up in the region's financial turmoil, officials said on Thursday.

The fund, expected to raise up to $1 billion in private capital, would invest in hundreds of companies in the hardest-hit economies, including Indonesia, South Korea and Thailand, the International Finance Corporation said.

The fund would be part of a $10 billion initiative, announced this week with few details by the United States and Japan to help banks and companies to restructure.

The world's richest nations hope the new initiative will help ease the global financial crisis, which started in Asia a year- and-a-half ago, and spread to Russia and Latin America.

So far, the International Monetary Fund, the World Bank and other global lenders have pledged more than $180 billion in major bailouts for Indonesia, South Korea and Thailand, Russia and Brazil.

Javed Hamid, the IFC's director for East Asia and the Pacific region, said the newly-proposed equities fund aimed to bring wary investors back to Asian markets and help companies raise capital in a tight credit environment to pay off their debts and fund other operations.

"It'll make a major statement that investors are returning, companies are restructuring and things are going to start looking up," Hamid said in an interview.

The IFC-backed equities fund would target soundly-managed Asian corporations, providing them with cash to restructure their debts and fund other operations.

Hamid said the new fund should be up-and-running early next year, with start-up capital from the IFC and other multilateral lenders. An investment firm would run the fund's day-to-day operations. The IFC, which helps finance private sector projects in developing countries, has already approached firms in the United States and Asia about managing the fund. It has also committed to bringing in international investors.