📒 Quick Take: Asia’s Mushrooming Private Credit
Private credit funds are proliferating in Asia, but their ability to recover a loan when it goes bad is the key differentiator.
Part One: Mushrooming Funds (9 May 2025)
Part Two: Standing Out (10 May 2025)
🍄 Part One: Mushrooming Funds
9 May 2025
Private credit funds are lured by opportunities ranging from scooping up distressed assets in Hong Kong to getting juicy returns from Indian borrowers.
The Australian market is developing rapidly, but Southeast Asia is growing at a slower pace partly because investors have to navigate the diverse legal systems.
Private credit funds have been mushrooming in Asia, lured by opportunities ranging from scooping up distressed assets in Hong Kong to getting juicy returns from Indian borrowers.
Four years since China Evergrande Group’s implosion, China is still dealing with the fallout and many developers that had restructured their debt will likely have to go for Round 2. The property sector has USD 32 billion of bonds due this year, nearly a third of offshore maturities totalling USD 104 billion, according to a report by S&P Global Ratings.
China is considering a new model for its housing market, where developers must offer only completed property instead of relying on pre-sales, Bloomberg reported yesterday.
This is likely aimed at getting rid of excess supply that has suppressed prices, but it risks choking the remaining lifeline of cash-strapped developers. In short, lancing the boil is a way to prevent the rot from spreading, but it could get messy first.
The consolidation in China’s property sector is likely to accelerate in favour of state-owned developers and a handful of private companies.
The weaker developers may step up asset sales in a bid to survive, offering bargains for investors including private credit firms. However, some investors prefer acquiring assets such as commercial property in Hong Kong because of the enforcement challenges in mainland China.
In India, private credit is becoming a more common option to raise funds for capex, acquisitions and refinancings. In 2024, private credit deals grew 7% to USD 9.2 billion – spread across 163 transactions – from a year earlier, according to an EY report. In the second half of 2024, property remained as the dominant sector with 43% of total investments, followed by consumer durables and financial services.
While private credit is less liquid than high-yield bonds, Indian miner Vedanta Resources’ turnaround story showed how a private credit deal can move publicly traded bonds big time.
The company controlled by Indian billionaire Anil Agarwal secured a crucial USD 1.25 billion private credit facility in late 2023, which helped it to push out its bond maturities and rebuild its access to the debt markets. As a result, one of Vedanta’s bonds was among the best performers in India’s high-yield space with an 80% return last year.
India will likely continue to attract interest from private credit funds, but the Supreme Court’s decision last week to scrap JSW Steel’s acquisition of Bhushan Power & Steel (BPSL) under the Insolvency and Bankruptcy Code underscores the legal risk in the country.
Foreign investors including Ares SSG Capital, Deutsche Bank and Silver Lake had bought security receipts backed by BPSL debt and are now left in limbo, the Economic Times reported.
In short, BPSL’s lenders already chopped up the debt and offloaded chunks of it on various parties to reduce their exposure, so the Supreme Court’s order to liquidate the company must have been a collective head-scratcher. How do you unwind an acquisition and claw back the money around four years after the deal was supposedly finalized?
Down under, Australia’s private debt market is experiencing “remarkable growth”, with an estimated size of AUD 205 billion in assets under management as of end-2024, according to a report by Alvarez & Marsal.
Southeast Asia is growing at a slower pace, partly because investors have to navigate the diverse legal systems in the region. Indonesian borrowers also benefitted from the onshore banking liquidity over the last few years, though this wave has been receding.
Private credit is increasingly accepted as one of the options to raise money in Asia, so it’s likely here to stay.
🍄 Part Two: Standing Out
10 May 2025
As investors diversify into Asia Pacific amid the tariff war, private credit funds have to set themselves apart in an increasingly crowded market.
The ability to recover a loan when it goes bad could differentiate a private credit firm from the rest of the pack.
Private credit funds are proliferating in Asia Pacific, but they have to set themselves apart in an increasingly crowded market.
As investors reshuffle their portfolios amid the global tariff war triggered by US President Donald Trump, the Asia Pacific region has become an inevitable plank of their diversification strategy.
These are some of the latest private credit offerings:
Granite Asia has secured more than USD 250 million in anchor commitments for its private credit strategy, Libra Hybrid Capital Fund, ahead of the official fund launch.
India’s Kotak Alternate Asset Managers is raising up to USD 2 billion for a new private credit fund that targets an 18-20% investment return.
Hong Kong-based Gaw Capital Partners is seeking USD 2 billion for its Gateway Real Estate Fund VIII, which will invest in private credit and private equity in Asia Pacific.
Blue Mountain Bridge Capital in Hong Kong is raising USD 250 million for its first fund, with the aim of securing USD 150 million by end-2025.
Digital wealth platform Syfe is teaming up with BlackRock to offer Singapore investors more access to private credit.
Validus Group and Fintech Nation have created a USD 10 million private credit fund for small and medium businesses in Thailand and Indonesia.
Granite Asia’s foray into private credit came after the Singapore-based firm separated from the US arm of GGV Capital last year. This trend of spinning off Asia-focused operations will likely accelerate as investors seek to avoid being caught in the crosshairs of the US-China tensions.
Fund managers will likely have to tailor their approach to the local markets because of the diverse landscape in Asia. While China’s property distress may throw out bargain-hunting opportunities, some investors favour commercial assets in Hong Kong because it’s tougher to pursue enforcement on the mainland.
In general, Chinese courts would only recognize and enforce a foreign judgment on the basis of international convention, bilateral treaties or “principle of reciprocity”, provided that such a move does not breach the basic principles of Chinese law, state sovereignty and security or public interest, according to an article written by Bird & Bird.
In a Q&A published on Gaw Capital’s website, credit investments head Foster Lee said that while his team is highly flexible, they focus on “lender-friendly jurisdictions with a proven enforcement system.”
Co-Founder Kenneth Gaw added that the lending structure for Chinese borrowers “must allow for easy offshore enforcement, most likely in Hong Kong.”
Enforcement is also a challenge in Indonesia, where borrowers are seen to have an upper hand over foreign creditors.
When Visi Media Asia – the media arm of Indonesian conglomerate Bakrie Group – entered a local in-court restructuring (PKPU) last year, its private credit lenders fought to get their voting rights affirmed after the administrators allegedly sought to disenfranchise them.
Under the debt restructuring scheme that was eventually passed, secured creditors received 10% on 5 November 2024 and 5% on 6 February 2025, while the remaining debt would be swapped with equity, according to a company presentation.
Unsecured creditors would be paid in instalments stretching as long as 256 months. While something might be better than nothing, it’s hard to imagine any creditor being happy with this outcome.
Launching a new fund is the first step of the journey and the ability to recover a loan when it goes bad could differentiate a private credit firm from the rest of the pack.