KKR closes Inaugural Asia Credit Fund at $1.1 bln, focusing on Vietnam

Van Dat Wednesday | 05/25/2022 15:48

Trading information for KKR & Co is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., August 23, 2018. REUTERS/Brendan McDermid/File Photo

Leading global investment firm KKR has announced the close of a $1.1 billion fund focused on performing privately originated credit investments in Asia Pacific.

The fund will focus on originated senior and subordinated financing to leading corporates, family groups, and financial sponsors in the region, with an emphasis in Singapore, Indonesia, Vietnam, and Malaysia. 

The investment firm’s credit strategy is highly complementary to its existing equity strategies in Asia, and the close of the new fund represents a significant milestone for KKR in Asia Pacific region. However, the firm is much excited about Vietnam and Southeast Asia.  

In Southeast Asia, it focuses on Singapore, Indonesia, Malaysia, and Vietnam, the markets with constructive business and stable economic environments, said the KKR representative.

Vietnam is a market of focus for the investment firm, a KKR spokesperson told Vietnam Business Review. However, specific information about how much the fund is apportioning to the Vietnamese market has not been revealed.

For KKR, these markets are unique, the long-term fundamentals underpinning their growth are consistent and buoyed by strong macroeconomic tailwinds, including a large, young, and growing population, and the emergence of an enormous middle class.

Vietnam’s economic growth has been led by an acceleration of fixed investment, strong foreign direct investment inflows, and robust consumption, according to a KKR spokesperson.

Vietnam has become more attractive since it has strategically positioned itself as an attractive manufacturing base and a credible alternative to China for many international companies given its abundance of cost-effective labor. The favorable conditions offer opportunities in providing financing to selective high-quality companies and partners that are expected to benefit from these trends.

“Asia continues to benefit from favorable macroeconomic trends and long-term growth. However, the number of financing options available to companies looking to keep pace with this rapid growth has remained limited. We believe these dynamics provide an attractive landscape for alternative asset managers like KKR who are able to provide more flexible and differentiated credit solutions than traditional lenders,” said Ming Lu, Head of KKR Asia Pacific.

Bank capital represents approximately 80 cents of every dollar of credit capital in Asia, which is a far larger percentage than what we are seeing in North America and Europe. There is an imbalance of available financing for Asian businesses at a time when the region’s growth and prosperity have fueled an enormous demand for more flexible funding solutions by borrowers looking to seize the opportunities.

“With limited non-bank supply, we believe this market presents compelling opportunities for alternative credit providers like KKR. With ACOF, we are excited to play a larger role in meeting this unmatched demand and assisting leading businesses and sponsors across the region to meet their long-term growth ambitions,” said Brian Dillard, Head of Asia Credit at KKR.

ACOF received strong support from a diverse group of new and existing investors, including public and corporate pensions, sovereign wealth funds, commercial banks, insurance companies, asset managers and private investment groups, and family offices. KKR invested over $100 million alongside external investors through its balance sheet and employee commitments.

In Asia Pacific, the firm has closed 14 credit investments since 2019, accounting for approximately $2.4 billion invested by KKR and total transaction value of $4.7 billion. This has included providing acquisition financing and bespoke capital solutions for companies and financial sponsors in the environmental services, real estate, education, infrastructure, and healthcare sectors.

KKR established its credit platform in 2004 and made its first private credit investment in 2005. Over the past 17 years, KKR has built one of the largest private credit platforms globally with the ability to invest across the capital structure and liquidity spectrum.

Today, KKR manages approximately $184 billion of credit assets globally, including approximately $102 billion in leveraged credit, approximately $71 billion in private credit, and approximately $10 billion in strategic investments, as of March 31, 2022.

It has a team of approximately 170 credit investment professionals across nine cities in seven countries, including approximately 90 private credit investment professionals globally.

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