Our third edition of the Guide to Private Credit in Asia Pacific focuses on key issues that a private credit provider should consider across 14 Asia Pacific jurisdictions. It provides both a high-level overview and a more detailed jurisdiction-by-jurisdiction analysis.
Private credit is playing an increasingly important role on a wide range of financings including distressed and special situations credit, mezzanine facilities, infrastructure debt as well as senior financings to support leveraged acquisitions. While banks continue to receive the lion’s share of the overall financing market in the Asia Pacific region, we have observed that the landscape has been changing. Higher funding costs and increased regulatory scrutiny on banks have created a “financing gap” that is being filled by private credit providers who can offer flexibility and speed of execution.
In recent years, we have seen a large number of sizeable fundraisings by private equity funds, asset managers and credit funds focused on private credit investments in the Asia Pacific region and we expect this trend to continue. Private credit as an asset class has also been attractive to institutional investors in search of returns, risk diversification and more opportunities. We expect the private credit market will keep expanding across Asia Pacific in years to come.
With the exponential growth in bank-led green/sustainability-linked loans in Asia Pacific, ESG and sustainability is growing in importance in the private credit market and we anticipate this trajectory will persist. Until a few years ago, ESG and sustainability in private credit were largely limited to excluding investment in certain sectors (e.g., no investment in fossil fuels). However, we are now seeing funds actively seeking to lend to companies with sustainable business models and, like with the banks, hiring dedicated sustainable finance teams within those private credit funds to structure ESG financings and to monitor compliance.
We will be happy to provide more details of the rules and practice in any jurisdiction.
NOTE: The content of this Guide is current as of September 2024; the high-level guidance in this document is not intended to be comprehensive legal advice.