Varde raises US$400m for Asia credit as distress rises

HONG KONG: Alternative investment firm Varde Partners closed its first Asia dedicated credit fund after receiving commitments totaling about US$400mil, as opportunities expand for distressed debt purchases in the region.

The fund can invest across corporate credit, special situations lending and stressed and distressed real estate investments in Asia Pacific. 

Hedge funds in the region including Hong Kong’s LIM Advisors and OCP Asia have also raised money for lending.

Companies in Asia are jockeying for money as borrowing costs rise following tightening by central banks, geopolitical risks and landmark defaults. Opportunities to invest in distressed debt are also expanding, as the tighter financial conditions threaten to drag on economic growth. 

Minneapolis-based Varde, which has US$14bil of assets under management, sees growing demand for capital as banks retreat from the region and credit conditions tighten.

“We are seeing an uptick in distressed opportunities in Asia and also more investor demand to allocate specifically to the region,” said Ilfryn Carstairs, co-chief investment officer
at the firm.

On India

The fund recently launched a partnership with Aditya Birla Capital Ltd. in India to invest in stressed assets and opened an office in Mumbai in November. 

It plans to add headcount in India, where it has a regulatory license, and Australia, Carstairs said.

India, where soured debt is among the biggest in the world, is an “important market” and the firm invests in special situations, restructuring and buying secondary loans from banks, according to Carstairs.

A default by shadow lender Infrastructure Leasing & Financial Services Ltd. has made it harder for smaller firms to get funding. 

“Recently we have seen quite a tightening of credit market conditions for the NBFCs driven by volatility in the commercial paper and mutual fund lending markets,” said Carstairs, referring to non banking financial companies.

On Asia

Parts of the Asia high-yield market are showing signs of stress including certain companies from China and Indonesia, added Carstairs.

Varde Asia Credit Fund received commitments from pensions, endowments, foundations and family offices. The firm plans to increase the number of people in the region to around 60 in a few years, up from the current 45, according to Carstairs.

Varde is one of the creditors to embattled commodities trader Noble Group Ltd. - Bloomberg

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