📒 Quick Take: Asian Credit’s Shifting Currents
Asia has seen shifting currents across sovereigns, private credit and restructurings this year, with ripples that should extend until 2026.
China stood out as its sovereign bonds sold like hot mooncakes several years after it was labelled as “uninvestable”.
This year was also marked by the rise of Asian sovereign funds such as Indonesia’s Danantara and Mongolia’s Chinggis Khaan.
Asia’s private credit story is not just about loan allocations anymore, as managers are adjusting their pitch to highlight their structuring prowess and local relationships.
Foreign lenders often hit the same enforcement wall if the key assets are located in jurisdictions that are seen to favour the borrowers.
Asia has seen shifting currents across sovereigns, private credit and restructurings this year, with ripples that should extend until 2026.
Sovereign Comeback
Two months ago, I wrote that Asia’s bond tide has returned as issuers waded back to a more receptive offshore market.
China stood out as its sovereign bonds sold like hot mooncakes several years after it was labelled as “uninvestable” by some investors in the aftermath of its property implosion.
China raised a combined USD 8.6 billion by issuing dollar and euro bonds in November, with bids for both sovereign notes hitting a record total of at least USD 234 billion, Bloomberg reported. The dollar bond pricing made history because China was able to borrow as cheaply as the US.
This year was also marked by the rise of Asian sovereign funds, as Indonesia’s Danantara was officially launched in February while Mongolia’s Chinggis Khaan Sovereign Wealth Fund is preparing its investment strategy to diversify the Central Asian country from mining.
I wrote in November 2024 that Danantara was likely created to raise debt for President Prabowo Subianto’s development agenda without busting Indonesia’s fiscal deficit ceiling. I mapped Danantara’s fundraising route throughout the year, but noted that its bridge to bonds will likely hinge on the willingness of offshore noteholders to be repaid after the banks.
State-linked entities across Asia have also been caught between performing their national duty and reining in leverage. “This tug-of-war has long been a feature in the sovereign space, but now the stakes are higher because of the growing pile of debt to cover the costs of building infrastructure and subsidizing public services,” I noted in November.
More than 20 investors pushed Hanoi for urgent talks after prolonged payment delays from state-owned power company Vietnam Electricity (EVN), the Business Times reported. On 3 November, these investors wrote to Vietnamese ministers that EVN had halted or partially paid them since January 2025, with some cases dating back to August 2022.
Private Credit Cracks
Seven months ago, I flagged that even though private credit funds were proliferating in Asia, the ability to enforce their loans would eventually prove to be the key differentiator.
I also wrote that the growth of private credit as a financing option doesn’t remove its structural shortcomings: the lower quality of some borrowers and patchy jurisdictions across the region.
“In Asia, underwriting risk is only half the story — enforcement risk is the real wildcard,” according to a comment on my previous take. “The boom continues, but only managers with disciplined structuring and strong recovery frameworks will endure.”
Private credit also tends to be more opaque and tightly held, which means that it may take a while – if at all – for a secondary market to develop. (Check out this credit analyst’s notes on the illiquidity of private debt and Siew Fong Y.’s latest newsletter that summarized the APAC private credit scene).
Asia’s private credit story is not just about loan allocations or deployments anymore, as managers are adjusting their pitch to highlight their structuring prowess and local relationships. Nevertheless, I wrote that the party is still raging in India as private credit funds bet they can ride the tide and get out in time.
Restructuring Rodeo
One of the few bright spots in Asia’s restructuring landscape this year was SriLankan Airlines’ in-principle truce with its offshore bondholders.
Even though the flag carrier’s bondholders tried to flex their muscles, I pointed out in August that Sri Lanka had a trump card: a clause in its sovereign debt restructuring that prevented it from favouring a group of creditors over others.
Apart from that, the restructuring rodeo galloped on.
I wrote in May that Chinese developers such as Sunac China Holdings had dropped the pretend-and-extend exercise and the decks were stacked against offshore creditors. I also noted that borrowers like Vietnam’s Novaland are following the Chinese restructuring playbook, such as converting some debt to equity and prioritizing local creditors.
Novaland’s offshore bondholders will likely face obstacles if they seek enforcement in Vietnam, where the bankruptcy law is largely untested. Indonesia also has its own hurdles, as the local courts do not recognize foreign court judgments and applicants typically must “re-litigate”. (Click here for my Asia Restructuring Milestones).
As I noted in October, creditors typically pick Singapore as the venue for dispute resolution or schemes of arrangement because of the city-state’s perceived “halo”. However, lenders often hit the same wall if the key assets are located in jurisdictions that are seen to favour the borrowers.
It will take time for the legal systems to evolve, but the move by ASEAN Chief Justices to launch a regional model framework for cross-border insolvency last month is a step in the right direction. The only way to prevent jurisdiction-shopping is to get everyone on the same page.