The Financial Regulatory Authority (FRA) has approved the licensing of the Distressed Factories Restructuring Investment Fund under Licence No. 1033, with subscription for its units set to open on Sunday, 4 October.
Hassan Abdalla, Governor of the Central Bank of Egypt (CBE), and Khaled Hashem, Minister of Industry, announced last Thursday the launch of the Distressed Factories Restructuring Fund with capital of EGP 1bn. The fund seeks to implement presidential directives to restart distressed factories and entities and support industrial investment as a key pillar of the national economy.
The CBE Governor said the launch of the Distressed Factories Restructuring Fund marks an important step in the state’s efforts to support the industrial sector and enhance its contribution to GDP and economic growth by directing capital towards rehabilitating productive assets and utilising production capacities capable of achieving sustainable growth.
He added that the banking sector is sparing no effort to encourage investment and production while providing the necessary solutions to restart distressed factories by making various sources of financing available to this vital sector.
Abdalla also said the CBE and the banking sector will continue to support efforts to deepen local industry and provide alternative financing channels, contributing to the achievement of development targets and promoting sustainable economic growth.
For his part, Industry Minister Khaled Hashem said the launch of the fund is crucial to restructuring and restarting distressed factories, which is a priority for the Ministry of Industry as one of the main pillars of the state’s approach to boosting local production and enhancing the efficiency and sustainability of the industrial sector in Egypt.
He noted that the fund forms part of an integrated initiative targeting distressed factories.
Hashem explained that applications to benefit from the fund’s financing will be submitted through the Manufacturer Support System recently launched by the Ministry of Industry, through which the fund will assess factories applying for financing.
The Industry Minister expressed his hope that the fund would help restore unused production capacities, generate jobs, strengthen local supply chains, and enhance the competitiveness of Egyptian industry.
The fund is based on a specialised investment strategy aimed at supporting factories and industrial establishments facing financial or operational challenges despite having assets and production capacities that can be developed.
Its specialised team, in cooperation with the executive management of these establishments, will implement integrated restructuring plans covering loan restructuring, new capital injections, programmes to improve operational efficiency, and measures to strengthen governance frameworks. These efforts are intended to restore production efficiency, preserve jobs, and support the competitiveness of the Egyptian industrial sector.
According to the FRA, the fund’s units will be offered in accordance with the terms detailed in the information memorandum approved by the Authority. A total of 1 billion units will be offered, including units subscribed to by the fund’s founder, with a nominal value of EGP 1 per unit and a total value of EGP 1bn.
The new fund was established in accordance with the provisions of Capital Market Law No. 95 of 1992, its executive regulations and amendments, and the complementary regulations. It has a targeted size of up to EGP 1bn, to be paid in instalments according to available investment opportunities that meet the criteria disclosed in the information memorandum.
Among the key criteria is the investment manager’s commitment, when identifying target companies, to applying a set of quantitative and qualitative criteria to ensure the selection of companies capable of being turned around and generating an attractive return following restructuring, based on the feasibility study prepared by the investment manager.
Islam Azzam, Chairperson of the FRA, said the launch of the fund is the result of joint efforts and close cooperation between the Authority, relevant entities, and the fund’s parties. These efforts aim to implement the state’s plan to rescue distressed industrial companies and factories and utilise their existing production capacities and assets.
Azzam explained that the FRA continues to pursue an approach centred on employing non-banking financial products to strengthen sectors of vital importance to the national economy, while expanding and deepening activities under its supervision.
He noted that the continued development of the regulatory framework governing open- and closed-ended investment funds has had a positive impact on the business environment and contributed to the growth of secure investment channels under the FRA’s full supervision.
The Distressed Factories Restructuring Fund was established as a closed-ended private equity investment fund, with its units offered through a private placement restricted to qualified financial institutions, entities, and public and private legal persons, in accordance with the regulations issued by the FRA Board under Resolution No. 48 of 2019.
The fund’s investments are managed by CI Capital PI for Fund Management, Investment and Venture Capital. It aims to directly invest in shares and stakes in distressed companies operating in the food, engineering, chemicals, textiles and ready-made garments, pharmaceuticals, and building materials industries, with the aim of supporting the restructuring of these companies and developing their operational and financial policies.
The fund will play a key role in ensuring the implementation of recovery plans and achievement of operational targets, as well as restructuring industrial companies and distressed factories that have financial obligations they are unable to meet due to accumulated returns, while retaining a viable product, market share, and fundamental economic viability.
The fund will perform this role in coordination with the executive management of these distressed companies and factories, in accordance with decisions taken by the fund’s Investment Committee.
The investment manager may also form a technical committee comprising experts in the relevant industrial sector in which the target company operates. Its composition will vary according to the nature of the investment opportunity and the target industrial sector.
Investment opportunities will also be assessed before acquisition and prior to exit, while the fund’s net assets will be valued twice a year with the assistance of independent financial advisers registered with the FRA.
