The Ministry of Finance has detailed the structure of its debt recycling investment funds ahead of a conference tomorrow to explain the proposed joint government-private sector funds.
Over the next two years, corporate bonds with par values of billions of shekels are due to mature. In light of the economic crisis, with the non-bank credit market drastically limited, firms may have difficulties repaying the principal. As part of the Ministry of Finance's response to the crisis, it is setting up joint investment funds with the private sector to recycle some of the corporate debt.
Participating investment institutions will leverage the government's money in order to expand the overall size of the funds available.
The government will invest NIS 400-600 million in what are essentially debt-recycling funds. The fund investments will be for up to three years, but the funds will have an activity period of seven years, with up to three 1-year extensions.
Each fund will be allowed to invest up to 10% of its principle in a single company, or up to 15% in a group.
The funds will have a minimum return of 4%, and the government will split the profits.
The funds will be incorporated as limited partnerships. The fund manager, who will be chosen in an upcoming tender, will be the general partner, and the other investors the government and other investment institutions will be the limited partners.
The fund manager chosen will be the one who can organize the largest possible investment commitments from the other investors.
Published by Globes [online], Israel business news - www.globes-online.com - on December 31, 2008
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