MS Thai NPL

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	27002
Company name	Inter-Capital Alliance AMC
Country	Thailand
Sector	Finance & Insurance
Environmental category	FI
Department	Global Financial Markets Group
Status	Pending Approval

Date SPI disclosed	July 11, 2008
Projected board date	August 11, 2008

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

This proposed project is in connection with a sale of NPLs by Kasikornbank and its subsidiary Phethai Asset Management Company in an auction that took place in late 2007. The proposed project involves the financing related to the purchase of and the subsequent resolution of a portfolio of NPLs (Portfolio) won by Inter Capital Alliance Asset Management Co Ltd (ICAAMC), a Thai company of which Morgan Stanley Emerging Markets Inc is the largest ultimate shareholder.

Anticipated development impact of the project

The developmental impact of well-structured distressed asset transactions is well recognized. Such transactions help improve the stability of the banking system by:

- encouraging transparency in balance sheets as the true value of distressed assets is determined by the market value paid by the buyers of NPLs;
- and transferring distressed assets to specialized entities that can efficiently resolve such assets.

This helps the banking system achieve a capital adequacy level that is more consistent with the actual risks in bank portfolios. In addition, the efficient resolution of NPLs contributes to the development of a much better credit culture, especially in countries where the willingness to repay (as opposed to the ability to repay) has been the cause of serious portfolio problems in the banking systems. In most cases, such problems have had to be resolved at significant fiscal costs.

IFC's expected development contribution

IFC’s development contribution in this project concerns its re-engagement in the Thai market where IFC has not had significant investment activity in recent years. However, through partnerships with entities such as Morgan Stanley, there may be considerable opportunities for IFC to make a contribution in the local NPL sector over the next two to three years.

Environmental and social issues - Category FI

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.

The project involves IFC support for reworking a known distressed asset pool and considering the nature of activities supported, the Asset Manager will need to provide information pertaining to the pool regarding exposure to excluded activities on IFC's FI Exclusion List as well as information on any known unresolved social and environmental issues or high risk projects in the pool.

If the review indicates that the pool is broadly in compliance with the above requirements, the Asset Manager will be required to establish a Social & Environmental Management System (SEMS), relevant to its business process, that is satisfactory to IFC, prior to disbursement, to work with the assets being restructured to ensure that the projects are operating in compliance with the IFC exclusion list and the Applicable National Environmental and Social Laws and regulations, or have an action plan to achieve the same within a reasonable time frame, in any case not exceeding 18 months.

The Asset Manager will also be required to identify responsible, qualified persons to manage and implement the SEMS, demonstrate commitment and resources to implementing the SEMS, take action to remedy any gaps in implementation on an ongoing basis; and submit a periodic report to IFC as per a format to be provided by IFC.

IFC PROJECTS