Announcement of IFC Invests in Peru Privatization Fund on July 27, 1994

IFC INVESTS IN PERU PRIVATIZATION FUND WASHINGTON, D.C., July 27-- The International Finance Corporation (IFC) has approved an equity investment in the Peru Privatization Fund, a debt/equity conversion fund expected to contribute to the country's stabilization and structural reform program both by helping reduce Peru's external debt and by stimulating investor interest in privatization. The Fund will exchange outstanding Peruvian government debt contributed by international commercial banks for shares in state-owned enterprises (SOEs) that are being privatized. It will also use cash raised from institutional investors to purchase the shares of SOEs directly. The Fund will take minority stakes alongside multinational partners who successfully win their bids for the companies being offered for sale by the Peruvian government. The first of its type for Peru, the Fund is modeled on debt/equity conversion funds employed successfully elsewhere in the region. With a target size of US$250 million of face value of Peruvian debt (approximately US$110 million at current market value), the Fund is also expected to be the single largest of its type for Peru. IFC's equity investment will be for the cash equivalent of up to 12 percent of the total debt and cash commitments to the Fund. "The Peru Privatization Fund will help provide a sound basis for sustained economic growth in Peru," according to Julio Lastres, Manager of the Capital Markets Division of IFC's Latin America and Caribbean Department. "It will help make the former state enterprises more efficient and promote foreign investment in key sectors of the economy." The Fund is being sponsored by Midland Bank, The Chase Manhattan Bank, and Banco de Credito del Peru and will be managed by Samuel Montagu and Company Ltd. IFC has already worked with Midland Bank on successful debt/equity conversion funds in Chile and Argentina. Over the last two years, 20 Peruvian enterprises have been privatized, raising approximately US$2.5 billion. By the end of its term in 1995, the government hopes to have privatized 60 state-owned enterprises. IFC is a member of the World Bank Group and is the largest multilateral source of equity and loan financing for private sector projects in developing countries. IBRD IDA IFC MIGA ICSID