Best direct lending shops in Asia

2nd Year Associate in Corporate Development

Hi folks,

Have seen a lot of interesting discussion on direct lending (DL ) and key firms in the US. However a quick look online shows most firms mentioned in these discussions are not present in Asia - is this a reflection of how small the DL market is in Asia? Can anyone shed light on the Asian scene / share the most active players? Cheers.

Comments (6)

Sep 11, 2019

Look better, most of the big names have a presence.
Either direct or via a local partner.

    • 2
Most Helpful
Sep 11, 2019

Asia Pacific is a big world and I would include Australia, which is an important market. The below would be the key players, but note there are smaller funds that operate in syndications/CLO markets as well. The list also excludes other credit funds based in London/NY that cover Asia from those offices (e.g. Carlyle Credit Opportunities, EQT etc.)

Bain Capital Credit- strong presence in HK and Australia ($39BN). Do senior loans all the way down to special situations

HPS Investment Partners - leading player in Australia, NZ and strong presence across Asia Pacific. Top 5 global Senior, Unitranche, Mezz, Pref equity player ($60BN globally, ~$35BN in private credit)

Partners Group - strong presence in Asia and Australia with offices in Singapore and Sydney ($20BN globally)

KKR Credit- mixed with special situations credit, but decent presence in HK and Australia ($70BN across public and private credit)

Barings - strong platform but smaller tickets

Challenger- Australia only, part of the large annuity fund manager

Tor Investment - HK based credit manager ($1.1BN)

SSG Capital Management - HK based and works across credit and special situations (~$2.2BN)

Apollo Credit - based in HK and Singapore. Think they cover APAC from both offices. Not much presence in Australia. ($195BN globally, not sure how much in Asia)

Intermediate Capital Group - based in Sydney, HK and Singapore. Active across senior, mezzanine and equity though smaller tickets/syndications. ~EUR17BN in credit globally

OCP - special situations player based in HK and Singapore which covers APAC including Australia. (~$2.25BN)

PAG Credit - dominant player in direct lending and special situations credit. PAG are a well known PE and real estate player in Asia. FUM ~$1BN+ for credit

These firms are the majority of market share, though there are a lot of smaller players who are more in the syndication market / CLO vs. as a direct lender of senior or mezzanine loans. The megafunds (HPS, Bain, KKR, Apollo) have the majority share in direct/bilateral loans and deals.

An important factor here is that investment banks still continue to underwrite deals here so are a competitor to direct lending funds. But the market is increasingly becoming more favorable to non-bank lenders given the pull back from banks generally as we have seen in the US 10 years ago. Because of this structural shift, direct lending and private credit funds are becoming increasingly active and prevalent in this market

    • 7
  • 2nd Year Associate in Corporate Development
Sep 12, 2019

Thanks for this! Very useful insights - had a few questions and was hoping you could share your views on:
1. On the banking side, would you happen to know which ones are the most active lenders?
2. Also, how do credit funds compete against each other for deals - I imagine it comes down to debt pricing, leverage multiple, covenants? Or are there other key considerations too
3. To the point on megafunds having the most share in bilateral loans - wouldn't the larger companies who raise this debt prefer to go through auctions to minimise debt price? Curious about this

Thanks for sharing.

Sep 12, 2019

Please see response below:

1) Credit Suisse is a dominant player in Asia and Australia. As with their US Leverage Finance platform, they have a very strong Leverage Finance Business. They have done the majority of large deals in Australia for example, including underwriting KKR's acquisition of MYOB, APAX's acquisition of TradeMe and TPG's acquisition of Greencross. They also have a business called APAC Financing Group, which is their Principal Investing business which does on-balance sheet investing, somewhat like Goldman's SSG but more in performing credit not distress. The other dominant players are Goldman Sachs (at least so in Australia), J.P. Morgan and Deutsche Bank (have a very good Principal Investing book).

2) Larger credit funds have the benefit of scale. Increasingly borrowers are preferring to deal with just one lender, especially if their investment thesis involves growth capex/accordion upsizing down the line, given it is easier to deal with one lender directly than a syndicate of 10 lenders. So, if large credit funds can do 100% of the hold, then that is a big advantage. But you are right, the key competitive dynamics are as you mention, leverage, pricing, covenants, other undertakings etc. Reputation and credibility may be another factor, but is secondary.

3) Yes each borrower would usually go through a process, or at least, talk to a few lenders concurrently. Eventually as the deal gets towards the pointy end and to close the list naturally narrows. My comment around bilaterally was more around borrowers dealing directly with lenders in a process, not through an investment bank or debt advisor. The people in the middle are becoming less relevant, especially on the sponsor side.

    • 2
Sep 12, 2019
Comment