Q1 2022 - Private Debt Update

Singapore Private Debt Update

Q1 2022 – Faced with rising inflation and interest rates APAC private debt managers are adopting various strategies to take advantage of emergent opportunities.

Trends include:

1. Greater deal flow and interconnectedness between the major APAC debt markets, particularly Singapore, Hong Kong and Australia as global players leverage local relationships;
2. Growth in the use of innovative hybrid debt instruments that combine debt and equity characteristics that deliver greater deal flexibility;
3. Bigger debt funds deploying larger bilateral loans, but also teaming up with global players to participate in attractive syndicated deals; and
4. Tailored debt instruments that combine sophisticated collateral features and tight covenant arrangements supported by personal or corporate guarantees.?

APAC Private Debt AUM

While APAC private debt AUM is just a fraction of the larger US and European markets, APAC private debt AUM has doubled in the past 5 years, indicating sustained demand for innovative finance solutions.

It is estimated that in APAC there is a ‘credit gap’ of some US$4 trillion, which gives room for APAC non-bank financial institutions to expand loan books to meet hot demand for new credit facilities.

APAC Deal Flow

As independent loan facility agents and security trustees we see loan demand stemming from typically three types of debt deals.

1 - Bilateral loans

APAC private debt lenders are bringing patient capital into the Australian market generating competition for local banks and private debt funds, while Australian non-bank lenders are also exploring global opportunities.

2 - Syndicated loans

Perhaps the most interesting of the private credit loan market, several managers join to diversify their loan portfolio and facilitate the financing of large pan APAC deals. Infrastructure, real estate and trade finance are all attracting substantial interest.

3 - Non-performing loans

Some ‘special sits’ lenders are deploying dry power to finance otherwise non-performing or distressed debt. This creates opportunities for original bank lenders to exit the credit relationship and we are typically appointed as successor loan facility agent.

Why an independent facility agent and security trustee in APAC?

Compared to US and Euro credit deals, APAC deals stand out for their complexity with strong collateral features, tight covenant structures and are often supported by personal guarantees.?

Complex payments and interest rate calculations, numerous notices between multiple parties as well as diverse covenant tracking, amendments, waivers and secondary trading are all supported by our sophisticated digital platforms.