KKR eyes China special situations amid economic slowdown

A build-out of its regional distressed assets team is to come as the private equity firm puts greater focus on China.
KKR eyes China special situations amid economic slowdown

US private equity firm Kohlberg Kravis Roberts (KKR) believes China is ripe for opportunities in distressed assets, and has plans to set up a regional special situations team at a time when it is putting greater emphasis on mainland deals.

KKR Asset Management (KAM), which was established in 2004, will expand its global special situations group into Asia by mid-2012, focusing on corporate turnarounds, distressed debt, bankruptcy loans and rescue financing in the region, according to a recent comment made by the unit’s US-based head, Bill Sonneborn.

The regional special situations team will be set up in the next six to nine months. It will most likely operate from KKR’s Hong Kong office, which serves as the firm’s Asia-Pacific headquarters and employs about a dozen staff, led by KKR Asia managing partner Joseph Bae.

China, where a slowdown in economic growth is underway, will be a particular focal point for the special situations unit, which falls under the alternatives division of KAM. 

A $14 billion credit-focused asset management platform for institutional investors, KAM has about 60 staff across New York, San Francisco and London. The platform’s main investment area is focused on marketable securities, including bank loans and high-yield bonds.

KKR’s plan to extend the special situations team into Asia comes as the firm’s overall operations in the region are understood to be putting a greater emphasis on China, with possible executive changes being made in the near term.

KKR in February this year closed its $1 billion China Growth Fund, which primarily targets growth capital deals in the mainland, but can also invest in China-focused companies in Hong Kong and Taiwan. Last year, it paid an undisclosed sum to acquire a minority stake in mainland investment bank China International Capital Corp from Morgan Stanley.

KKR, which has about $60 billion in AUM, declined to comment on the Asia plans of its global special situations group at press time.

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