Asia's private credit markets thrive as desperate borrowers find lenders
By Rae Wee
SINGAPORE (Reuters) — When global commercial real estate services firm JLL found public debt and loan markets were averse to funding a property project in Arizona, it turned to private credit markets and easily got the loan.
The $585 million refinancing loan for real estate company Five Star Development was at an undisclosed spread over overnight rates, possibly more expensive than any bank loan or bond.
But Bryan Clark, managing director of JLL Capital Markets, says there were challenges in public debt markets, including lenders' reluctance to finance construction projects, the volatility in debt markets and that even lenders who were able to provide financing were «unable or unwilling» to write a loan of this size.
Private lenders, meanwhile, had «significant liquidity» to deploy for such financings, proving to be a right fit.
The deal announced in May is one in a booming private credit market where long-term lenders such as pension funds and wealth managers seeking to lock in rich yields are meeting desperate borrowers stonewalled by public markets.
Besides property developers, borrowers thronging private markets include privately-held companies and start-ups whose private equity issuance has been stymied by broader stock market swings and the deepening discounts of their valuations, known as a 'down round' in the industry.
Lenders are queuing up too, enticed by the prospect of higher returns as a result of an «illiquidity premium».
Asia, which had long trailed its Western counterparts, has also caught onto the trend. Investment firm Muzinich & Co. recently announced it had closed a $500 million Asia Pacific private debt strategy.
Private lending yields produce a return of about 10% to 18%, typically for
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