Investors betting big on high-yielding credit opportunities

economictimes.indiatimes.com:

investors Cerberus Capital, Ares SSG, Varde Partners, and Davidson Kempner are raising their bets in the Indian market as many stressed firms, largely cut off from bank funding, offer an opportunity. Recently, a Shapoorji Pallonji Group company raised ₹14,300 crore through the sale of bonds at a yield of 18.75%.

These investors see many opportunities, such as those at Jaiswal Neco, Kesoram Industries and Suzlon. Their interest is driven by the potential returns and opportunities offered by such issuances.

«The private credit market is buzzing with excitement after the success of the largest low-grade rupee-denominated debt sale that offered an attractive high yield,» said a private credit fund manager. «Now, they are looking for more such high-yield opportunities.» There may be some opportunities with companies like Jayaswal Neco and Kesoram Industries seeking funds from private credit sources to refinance existing high-cost borrowing of over 20%, while Suzlon is raising money at lower interest rates to expand their businesses.

Jayaswal Neco is looking to refinance ₹3,200 crore to bring down borrowing cost by 4-5% which was borrowed at over 24% in 2021, as part of an out-of-court restructuring with Ares SSG Capital and Bank of America. Similarly, Kesoram Industries has appointed IndusInd Bank to refinance its high-cost debt of ₹1,800 crore which was raised at a rate of 20.75% in 2021 with cheaper money.

While these private credit funds had so far focused on stress-related transactions and bridging loans for IPOs and special situations, are now expanding to take exposure to performing credit as well. Borrowers in this market are typically companies with positive Ebitda but face challenges in servicing their debt.