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Peru's Cofide to receive 168M soles in capital to cover loan delinquencies

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Peru's Cofide to receive 168M soles in capital to cover loan delinquencies

Peru-based Corporación Financiera de Desarrollo SA will receive a capital contribution worth 168 million soles, or about $51 million, from the Peruvian government to cover 100% of its nonperforming loan portfolio this year, SEMANAeconómica reported, citing the bank's chairman, Pedro Grados.

With the capital injection, Cofide aims to reduce its loan delinquency to 15% by the end of the year from the current 27%, Grados said. Aside from the upcoming financing, the bank obtained $161 million for debt capitalization in the first quarter.

One of the operations that will be wholly provisioned is the gas pipeline Gasoducto Sur Peruano, which is part of the bank's transactions with Brazilian construction company Odebrecht. The construction firm was involved in a wide-ranging corruption probe in Latin America that left many banks with outstanding loans tied to the company's operations.

In August 2017, Moody's downgraded Cofide's ratings to Baa3 from Baa2, citing "a sharp deterioration in the company's asset risk profile, and consequently of its profitability." The firm's outlook was also revised to negative from stable.

"With the June financial statements we should change the negative outlook towards stable, and later obtain an increase in our credit rating," Grados told the publication.

Starting in July, the state-owned development bank will prioritize its goal to be self-sustaining to boost income generation, Grados said. The bank is looking to end the year with a profit between 15 million soles and 20 million soles, the chairman said, adding that "2018 is the year of consolidation."

As of June 1, US$1 was equivalent to 3.27 Peruvian soles.