China interested in IFC toxic asset plan -Zoellick

By David Lawder

ISTANBUL, Oct 5 (Reuters) - China has shown interest in investing in a new International Finance Corp program to acquire and restructure distressed debt in developing countries, World Bank President Robert Zoellick said on Monday.

Zoellick, speaking at a ceremony to launch the program that that aims to mobilize more than $6 billion to help banks and companies sell or restructure troubled assets, said he recently discussed the program with China Investment Corp, Beijing's sovereign wealth fund.

"They're interested in investing in distressed debt. They told us 'we can do it in the United States, but we're a little wary of doing it in the developing world because we don't want to be accused of anything'," Zoellick said. "To come in with us in a real restructuring program, they have some significant interest."

Zoellick did not elaborate on how much CIC might consider committing to the program or when that might occur. IFC's Debt and Asset Recovery Program (DARP) aims to mobilize private investment to buy into pools of distressed debt and invest directly in businesses that need to restructure debt.

CIC has committed to buying up to $4 billion in distressed U.S. assets, half of which would flow into U.S. Treasury-subsidized public-private investment funds to buy up toxic mortgage-related securities, according to people familiar with the sovereign wealth fund's plans.

The Wall Street Journal reported that CIC would invest about $1 billion in Oaktree Capital Management LP, one of the fund managers that is expected to soon win approval by the Treasury to start investments in securities.

In addition, CIC will contribute some $600 million to $700 million to three additional private funds to invest in assets from property to infrastructure, including funds managed by Goldman Sachs (GS.N) and Oaktree, people briefed on the plans have told Reuters.

INTERNATIONAL PARTNERS

By partnering with the IFC, the World Bank's private sector lending arm, CIC would have an intermediary that could vet its investment choices and limit any suggestions that it may be trying to influence small developing countries. It would be working with partners from several different countries.

The IFC said on Monday that it was working on a distressed debt facility with Standard Bank (SBKJ.J) of South Africa and partnering with Tata Capital to launch a company to service nonperforming loans in India.

IFC has committed $1.55 billion to DARP over three years and hopes to mobilize up to $5 billion more from other international financial institutions and private sector partners. It is working with the European Bank for Reconstruction and Development and CRG Partners, a restructuring fund manager focused on central and eastern Europe.

The initiative is one of several private sector efforts that IFC has launched worth several billion dollars to help developing countries cope with the financial crisis.

These include programs to provide trade finance and liquidity, finance stalled infrastructure projects, provide capital to banks and boost microfinancing. (Editing by James Dalgleish)