ADM Capital, a Hong Kong-based private credit manager, is looking to raise $200 million for a lending platform in Asia, having already secured $50 million from IFC, the private-sector arm of the World Bank, and $50 million from another institution.
The ADM Capital Somei Lending Platform is seeing significant interest from other investors, with IFC’s involvement proving a strong draw, said Sabita Prakash, head of investor relations and business development at ADM. Private debt is an asset class that has attracted growing interest of late as investors seek higher and/or more stable, consistent returns.
The ADM fund is structured like a loan provided by institutions such as IFC, so it gets a coupon or interest payment every year or six months. But the profit is locked up in the fund and will accrue at the end of the facility. The portfolio targets low-double-digit net yearly returns.
The plaform will support sound, but financially stressed companies in Asia, providing loans to small and medium enterprises (SMEs) in the absence of bank financing. In turn, it will offer its lenders limited downside via over-collateralised positions and modest upside through profit sharing, said ADM and IFC in a statement.
Investor participation is structured in the form of a syndicated loan platform with a revolving senior tranche plus a junior tranche and principal repayment to investors after eight years. Individual loans are expected to range from $10 million to $15 million with maturities of up to three to five years.
ADM only raises money from institutional clients, which could include family offices or private banks, Prakash told AsianInvestor. Insurers and pension funds are happy to invest in a strategy with an eight-year lock-up, because it is suitable for their asset-liability matching, she said.
Meanwhile, private and family offices and foundations are increasingly interested in investing along environmental, social and governance (ESG) lines, which fits with IFC’s stringent standards in that regard, said Prakash.
The platform will target all IFC-eligible countries in Asia – from the biggest emerging markets, such as China and India, to smaller nations such as the Philippines and Thailand, to frontier markets including Myanmar and Vietnam. There is no top-down sectoral or geographic allocation, said Prakash.
Asked if the increased scrutiny of private lending in China, following the Ezubao peer-to-peer lending ponzi scandal at the end of last year, would affect the platform, she was sanguine.
China is seeing a lot of changes in terms of both regulations and the types of credits that are available, said Prakash, but ultimately the mainland authorities are trying to improve financing conditions.
“At the moment there is very good financing available for well recognised and highly capitalised companies,” she added. “But where it will be key is for mid-market sized corporates that are trying to grow and build a niche in the market. In that sense the Chinese government will do all it takes to improve financing.”
So while some regulations may be put in place to ensure the growth of private lending will be gradual, she said, “we have experience of investing in China and we don’t believe it’s going to be a problem. We actually think it will be a very big opportunity.”
The is the second time ADM and IFC have teamed up on such a project in Asia, having launched a lending facility in 2012 as financing from European banks dried up in the wake of the eurozone debt crisis. The structure was similar, and the platform had targeted $300 million. That strategy, the Asia Secured Lending Facility, is nearing maturity and full capacity utilisation, noted ADM.