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Apollo, ICICI Venture to launch $750-mn fund

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The special situation fund will invest in Indian distressed assets

, the global leader in the alternative asset management business, will partner , one of India’s largest private equity firms, to launch a special situation fund. An agreement for the $750-million fund will be signed soon, persons close to the development said.

In India, there is a huge opportunity for investments in distressed assets due to the mounting number of such large loans in the Indian banking sector. A number of financial institutions have already established their presence with their distressed asset funds in the past.

The new venture, exploring opportunities in the areas of special situations and distressed assets in India, will be headed by , senior general manager of ICICI Bank. Kikani will move to ICICI Venture as managing director and senior partner on the advisory board in India in order to head this initiative with the Apollo Group. When contacted, the ICICI Venture spokesperson declined to comment, while mails sent to Apollo’s spokesperson did not elicit any response.

These funds, typically invested in companies facing special or distressed situations, include corporate spin-offs, corporate restructuring, illiquid secondary stakes, cross-holding stakes, privatisation, bankruptcy and non-performing assets or loans (NPAs or NPLs).

Similar to the Apollo move, WL Ross & Co LLC, one of the world's leading private equity investors in corporate restructuring, had tied up with Housing Development Finance Corporation () to float a $300-million India Asset Recovery Fund LP, with co-investment from WLR Recovery Fund III LP, in 2005. In 2006, the Fund acquired textile manufacturer-OCM India Ltd for $37 million in cash (Rs 170 crore). In 2008, WL Ross invested about Rs 345 crore ($80 million) from the same fund in SpiceJet Ltd to acquire a minority stake.

Eying the Indian distressed asset market, Edelweiss Capital, the non-banking financial services major, had launched a $400-million distressed assets fund last year, through Edelweiss Alternate Asset Advisors (), the alternative investments arm.

Other institutions involved in the business of asset reconstruction in India include the ICICI-promoted Asset Reconstruction Company of India (Arcil), the UTI-promoted ASREC India Ltd, IFCI-promoted Assets Care Enterprise (ACE) Ltd, the ADA Group-promoted Reliance ARC, Kotak Mahindra’s Phoenix ARC, Pridhvi Asset Reconstruction and Securitisation Company and International Asset Reconstruction Company (IARC), formed by State Bank of India's former chairman M.S. Verma and Arun Duggal, former MD& CEO, Bank of America.

Apollo had assets under management of over $67 billion as on December 31, 2010, in private equity, credit-oriented capital markets and real estate funds invested across various industries. ICICI Venture has assets under management of over $ 2 billion.

ICICI Venture, headed by Vishakha Mulye as MD & CEO, runs three private equity funds ($245-million India Advantage Series 1, $810-million IAF Series 2, $400-million IAF Series 3), Real Estate Fund ($562-million IAF Real Estate Series 1), $692-million Emerging Sector Fund, $51-million IAF Mezzanine Fund Series 1 and the recently launched $750-million infrastructure fund.

Following global private equity majors such as Blackstone and Kohlberg Kravis Roberts (KKR), Apollo had floated its $565- million worth IPO early this year. Approximately 44 per cent of Apollo’s private equity investments have involved distressed buyouts and debt investments. The distressed securities Apollo purchases include bank debt, public high-yield debt and privately held instruments, often with significant downside protection in the form of a senior position in the capital structure.

Some of Apollo’s distressed buyout investments include Charter Communications in 2009, Gala Coral in 2010 and Lyondell Basell in 2010. Apollo has another arm, AP Alternative Assets, L.P., which invests in private equity and capital markets investment opportunities sponsored by Apollo.

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