Bain Capital is planning its first Asia-focused credit fund, seeking to raise $1 billion to capitalize on distressed debt and direct lending opportunities as banks dispose of those assets and operations, people familiar with the plans told Reuters.
The move would double the private equity firm's presence in credit-related investments in the region as it also has about $1 billion in distressed debt and so-called special situations transactions done through its global funds.
Indian and Chinese banks, in particular, are looking to dispose of billions of dollars in soured loans to real estate and mining projects, manufacturing plants and industrial conglomerates.
Bain is one of the world's largest private managers of credit and fixed income instruments with about $30 billion invested in those assets. The planned doubling of its Asia credit exposure underscores what Bain and other distressed debt players like Oaktree Capital Group LLC see as huge opportunity to expand in the region.
The Boston-based firm plans to launch the new fund in the first half of 2017 and will focus mostly on special situations, the people said.
Special situations refer to event-driven investments such as bets on companies that are distressed, the target of a takeover or whose assets will be spun off.
Bain is "laying the groundwork for the fund, given the size of the opportunities and the pipeline of potential deals," said one of the people, who declined to be identified because details of the fund have not been made public.
Bain declined to comment. Bain's investments in the region include buying loan books from JPMorgan Chase & Co, Lloyds Banking Group and Standard Chartered in Asia.
The firm last May completed the purchase of GE Capital's commercial lending and leasing portfolios in Australia and New Zealand in a deal valued at about $1.2 billion.
Bain also has a partnership with Indian conglomerate Piramal Enterprises Ltd that is looking to invest more than $1 billion in distressed assets in India over the next few years.
"Any private equity firm in the world that has a credit franchise is growing that part of the business, is investing in the theme, is creating different products in credit and is trying to become much more global," said a large investor in private equity firms who has invested in Bain's funds. The investor declined to be identified.
Asia-focused private debt funds raised about $2 billion in 2016, a fraction of the $76 billion raised globally, according to data provider Preqin. The previous year was a record for private debt fundraising globally with $96 billion, with Asia-focused funds taking in $7.1 billion.
"Credit, not just in China, but regionally, is an area that seems to have a huge tailwind. The factors that are in play in China, which is that banks are increasingly unwilling to lend to small and medium-sized enterprises, are at play elsewhere," said one of the people familiar with Bain's plans.