Singapore bank DBS Group has announced that it will be an anchor investor in US-based investment firm Muzinich and Co’s Asia-Pacific private debt fund.
The bank will invest up to $200 million in Muzinich APAC Private Debt I or 40% of the total fund size, whichever is lower, it said. DBS will also have representation on the fund’s investment committee and advisory committee.
The transaction is in line with the group’s strategy of investing in new revenue and growth avenues arising from special situations opportunities created by the pandemic, DBS said in a statement.
Muzinich APAC Private Debt I fund is focused on private debt solutions targeted at lower middle-market companies with an EBITDA range of $5 million to $50 million and an operating history of three years or more, with audited financials.
The fund aims to generate recurring cash income with capital appreciation potential while minimising credit impairments, build a diversified portfolio across geographies and industries, as well as incorporate an ESG-conscious approach towards investments.
The investment will offer DBS several strategic benefits, including providing the group with growth exposure to recovery opportunities in the Asia Pacific, one of the fastest-growing regions globally. The region’s GDP is growing at 4.8% per annum, versus Europe at 1.5% and North America at 2.1%, according to IMF’s April 2020 World Economic Outlook Database.
The investment would also extend and diversify DBS’s credit participation beyond its traditional debt portfolio, aside from allowing it to have more active involvement in the fund activities to build up product know-how in the special situations space.
DBS CEO Piyush Gupta said while the special situations space is already well-established in the US and Europe, there is still room for further penetration in the Asia Pacific, especially as the region gradually recovers from the pandemic.
“This fund can play an integral role in bridging the financing gap faced by businesses that have been dislocated by the disruptions, complemented by our already established fixed-income franchise in deal sourcing and meeting more bespoke funding and investment needs across Asia,” he added.
Founded in 1988, Muzinich has offices in Hong Kong and Singapore, among others. The firm’s total assets under management currently stand at $39.3 billion.
It launched its private debt platform in 2014. As of June 2020, the private debt platform had $1.9 billion in committed capital and over $1.1 billion in invested capital.