S Korea dominates in Asia leveraged loans on private equity

Seoul cityscape. Photo: Pixabay

South Korean lenders have dominated the ranks of firms participating in leveraged loans in Asia excluding Japan this year, as they provide funds for private equity firms that are on a buying binge of the country’s assets.

Eleven financial institutions from the peninsula, led by government-backed Korea Development Bank, took up all the top spots as the most active participants in the region’s leveraged facilities this year through July 2, according to data compiled by Bloomberg. Last year the firms were a mix of European, Korean and Taiwanese lenders.

“Private equity firms especially from abroad seem to be actively looking at Korean companies, especially in the biopharmaceutical and cosmetics industries, and they are seeking loans for those acquisitions,” said Bae Suk-hee, Seoul-based team head in the M&A department of Korea Development Bank.

Korean suppliers of finished products such as ships and smartphones along with vital components like displays and semiconductors are key targets for private equity funds. Steady economic growth and receding tensions with North Korea strengthen the case for investing in the country.

In Asia excluding Japan as a whole, leveraged loans came to $14 billion via 35 deals this year through July 2, nearly tripling from $5.5 billion via 18 transactions from the same period last year, according to data compiled by Bloomberg.

Cash committed to private equity funds in Korea has been increasing, coming to about 62.6 trillion won ($55 billion) at the end of 2017, from 20 trillion won at the end of 2009, according to the Financial Supervisory Service. Funds will also have plenty of cash in search of investment targets to take care of the nation’s growing senior population — the National Pension Service, the country’s biggest retirement fund, manages more than 600 trillion won.

Bae said there’s a lot of so-called dry powder, or money raised but not yet invested at private equity funds, “so I think such private equity-driven M&As will continue for a while.”

The private equity industry has thrived over the last 13 years in South Korea and now accounts for roughly a quarter of all of the country’s M&A activity, Richard Lee, a senior partner at McKinsey & Co., wrote in a report.

Read more: Leverage in Asia Buyout Loans Is Edging Back to 2007 Levels

Private equity funds have invested almost $100 billion of capital into more than 870 companies in South Korea since 2005, the year the market opened up following regulatory changes that enabled the creation of local buyout funds, according to McKinsey.

The data compiled by Bloomberg focus on deals where lenders invested money in leveraged facilities. The primary use of the proceeds in those deals was leveraged buyouts, management buyouts, recapitalization and secondary buyouts. The figures exclude work as mandated lead arrangers and bookrunners.

Bloomberg

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.