Private Debt Spotlight

Volume 1, Issue 2 Private Debt Spotlight June 2016 Welcome to the latest issue of Private Debt Spotlight, the monthly newsletter from Preqin providing insights into private debt fundraising,  Feature Article: Distressed Debt in North 2 investors, performance and more. Private Debt Spotlight America uses information from our In this month’s feature article, we analyze North America-focused distressed debt funds, including fundraising, dry powder, the largest funds to have award-winning Private Debt closed and more. Online service.

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Distressed Debt in North America

In this month’s feature article, Doug Paolillo analyzes North America-focused distressed debt funds, including fundraising, dry powder, the largest funds to have closed and more.

Fundraising and Dry Powder Due to the economic environment in The subsequent period until 2013 saw a which fund managers were so readily small increase and then relative stability Dry powder within the private debt able to fi nd high-quality investment in dry powder levels for distressed industry has more than quadrupled opportunities, there was a net reduction debt funds focused on North America. since 2005, rising from $42.8bn to an all- in distressed debt dry powder – record Global fundraising fi gures grew to a time high of $194.3bn (as of May 2016). investment followed record fundraising post-GFC high of $28.2bn across 29 Strong investor appetite for distressed in the years after 2008. As such, even funds closed in 2012 (Fig. 2), indicating vehicles, among other strategies, has though 2007 and 2008 were the most a continuation of strong distressed deal fuelled the expansion of the private debt successful years in terms of aggregate fl ow during this period. North America- asset class to reach a substantially wider capital raised for distressed debt focused distressed debt fundraising investor base than pre-2007. Following funds – led by mega debt funds from saw considerable success in 2015, with the Global Financial Crisis (GFC), Oaktree Capital Management, Avenue $17.2bn secured across a total of 13 distressed debt fund managers sought Capital Group and Bain Capital Credit vehicles. As of May 2016, dry powder to capitalize on the new investment (previously Sankaty Advisors), among held in distressed debt funds globally opportunities available, primarily across others – global distressed debt dry has reached an all-time high of $63.7bn, the heavily affected economies in North powder levels dipped slightly in 2008 up 12% from the previous record high America and Europe. and 2009 from the $43.8bn held at the of $56.7bn at the end of 2015. Of the end of 2007 (Fig. 1). current $63.7bn in global dry powder,

Fig. 1: Distressed Debt Dry Powder: Global- vs. North Fig. 2: Annual Distressed Debt Fundraising: Global- vs. America-Focused, December 2003 - May 2016 North America-Focused, 2005 - 2015

70 50 63.7 45 44.3 43.7 60 40 38.6 36.1 50 35 46.3 30 28.2 40 24.8 25.7 25 22.8 21.6 20.9 19.5 30 20 17.7 18.9 17.2 15.8 15.2 15 20 10.5 Dry Powder ($bn) 10 8 8.2 7.4 6 4.4 10 5

Aggregate Capital Raised ($bn) 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Year of Final Close Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 May-16

Global North America Global-Focused North America-Focused

Source: Preqin Private Debt Online Source: Preqin Private Debt Online

Fig. 3: 10 Largest North America-Focused Distressed Debt Funds Closed, 2015 - 2016 YTD (As at 17 May 2016)

Fund Firm Target Size ($mn) Fund Size ($mn) Final Close Date CVI Credit Value Fund III CarVal Investors 2,000 3,046 Jun-15 GSO Energy Select Opportunities Fund GSO Capital Partners 2,500 2,500 Sep-15 Castlelake IV Castlelake 1,500 1,900 Jul-15 Black Diamond Capital BDCM Opportunity Fund IV 1,000 1,500 Jun-15 Management Catalyst Fund V The Catalyst Capital Group 1,250 1,500 Sep-15 Davidson Kempner Long-Term Distressed Davidson Kempner Capital - 1,304 Sep-15 Opportunities Fund III Management Avenue Energy Opportunity Fund Avenue Capital Group 750 1,300 Jun-15 Oaktree Principal Fund VI Oaktree Capital Management 1,800 1,223 Aug-15 Monarch Alternative Capital Partners III Monarch Alternative Capital 850 1,220 Apr-15 Apollo Energy Opportunity Fund Apollo Global Management - 1,050 Mar-15

Source: Preqin Private Debt Online

$46.3bn (73%) is held by fi rms managing Fig. 4: North America-Focused Private Debt Fundraising by Strategy, funds focused on North America, which 2010 - 2016 YTD (As at 17 May 2016) continues to be the hub of distressed debt activity globally. 100% 1% 3% 3% 3% 2% 3% 5% 7% 4% 90% 14% 15% 10% 1% Venture Debt Fundraising for North America-focused 20% 1% 80% 25% distressed funds has experienced a 10% 31% 31% 26% Special Situations slow start to 2016, with just one vehicle, 70% 25% raised by Atalaya Capital Management, 60% reaching a fi nal close on $773mn. It is 33% 12% Fund of Funds possible that lower relative fundraising 50% levels, specifi cally in the North America- 64% 48% 30% 40% 33% Mezzanine focused distressed debt segment, will 50% cause dry powder totals to fall, given 30% that fund managers look set to steadily 50% Distressed Debt 20% 41% deploy capital throughout 2016. 31% 25% 10% 19% Direct Lending 12% 10%

Since the beginning of 2015, 14 North Proportion of Aggregate Capital Raised 0% America-focused distressed debt funds 2010 2011 2012 2013 2014 2015 2016 have reached a fi nal close, 10 of which YTD closed on more than $1bn (Fig. 3); the largest of these is CVI Credit Value Year of Final Close Fund III by CarVal Investors, which Source: Preqin Private Debt Online closed on $3bn. Three funds closed during this period with a primary focus focused fundraising than distressed debt one managed account, three of which on opportunities in the energy sector (33%). invest in North America, and has an from Apollo Global Management, estimated $6.6bn in distressed debt dry Avenue Capital Group and GSO Capital Fund Managers powder. Centerbridge Capital Partners, Partners, all three of which held a fi nal KKR and Cerberus Capital Management close for more than $1bn. Oaktree Capital Management tops the are other notable fund managers in terms league table for fund managers with of distressed debt dry powder available, Fig. 4 shows annual private debt the largest amount of global distressed all of which hold substantial reserves of fundraising since 2010 by strategy. debt dry powder, with an estimated more than $1.7bn. Distressed debt historically accounted $11.3bn (Fig. 5). The fi rm is one of the for the industry’s largest proportion most active participants and largest Oaktree Capital Management has also of aggregate capital raised, but this fundraisers in the North American and raised the most capital for distressed proportion has decreased rapidly in global marketplaces, having closed fi ve debt funds in the last 10 years globally, recent years due to the unprecedented distressed debt funds since 2010, with with more than $45.7bn raised (Fig. 6). rise of direct lending. 2014 marked two additional North America-focused Distressed debt fund management in the the fi rst year in which direct lending funds currently in market. Since 2010, last 10 years has been characterized fundraising accounted for a larger Fortress Investment Group has held fi nal by large-scale operations with diverse proportion (41%) of North America- closes on four distressed debt funds and credit platforms, which allow fund

Fig. 5: 10 Largest Firms by Estimated Distressed Debt Dry Fig. 6: 10 Largest Firms by Aggregate Capital Raised for Powder, Globally Distressed Debt Funds in the Last 10 Years, Globally

Aggregate Capital Estimated Dry Firm Headquarters Firm Raised in Last 10 Headquarters Powder ($mn) Years ($mn) Oaktree Capital Oaktree Capital 11,326 North America 45,665 North America Management Management Avenue Capital Group 19,051 North America Fortress Investment Group 6,624 North America Centerbridge Capital 17,640 North America Partners GSO Capital Partners 5,250 North America Fortress Investment Centerbridge Capital 15,842 North America 4,303 North America Group Partners CarVal Investors 13,968 North America Bain Capital Credit 3,239 North America Bain Capital Credit 10,900 North America CarVal Investors 2,821 North America GSO Capital Partners 10,703 North America Avenue Capital Group 2,015 North America Cerberus Capital 10,136 North America KKR 1,983 North America Management Castlelake 1,787 North America Varde Partners 6,955 North America Cerberus Capital Apollo Global 1,727 North America 6,783 North America Management Management

Source: Preqin Private Debt Online Source: Preqin Private Debt Online

Fig. 7: 10 Largest North America-Focused Distressed Debt Funds in Market (As at 17 May 2016)

Fund Firm Target Size ($mn) Vintage Fund Status Oaktree Opportunities Fund Xb Oaktree Capital Management 7,000 2015 Third Close Centerbridge Special Credit Partners III-Flex Centerbridge Capital Partners 3,500 2016 Raising Cerberus Institutional Partners VI Cerberus Capital Management 3,000 2016 Raising Oaktree Opportunities Fund X Oaktree Capital Management 3,000 2015 Third Close Sankaty Credit Opportunities VI Bain Capital Credit 3,000 2015 Second Close MHR Institutional Partners IV MHR Fund Management 2,750 2014 First Close Carlyle Strategic Partners IV Carlyle Group 2,000 2016 First Close OHA Strategic Credit Fund 2016 Oak Hill Advisors 2,000 2016 Raising Centerbridge Special Credit Partners III Centerbridge Capital Partners 1,500 2016 Raising Anchorage Illiquid Opportunities V Anchorage Capital Group 1,250 2016 Raising

Source: Preqin Private Debt Online managers to access capital across Fig. 8: Estimated Private Debt Dry Powder by Primary Geographic Focus, the yield spectrum – dependent on December 2003 - May 2016 the speciﬁ cs of a potential deal. Apollo Global Management is one such ﬁ rm 140 that has seen substantial fundraising 125.5 success in the distressed debt segment, 120 while also operating a wide range of credit and equity vehicles on its platform. 100

Funds in Market 80 60 The fundraising marketplace offers many 55.4 opportunities for institutional investors 40 looking to make commitments in 2016. Dry Powder ($bn) A diverse set of credit managers are 20 raising vehicles, ranging from the largest 9.3 and most established global fi rms, to 0 4.1 specialized fi rms running a more niche strategy at a smaller scale. Preqin’s Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Private Debt Online currently tracks 25 May-16 distressed debt funds in market focused North America Europe Asia Rest of World on investment in North America, seeking a combined $37.1bn and accounting for Source: Preqin Private Debt Online the largest proportion (42%) of capital sought across all private debt strategies fund managers illustrates the paradigm managers held in funds and strategies targeting the region. The average size of shift in corporate lending in North that span the entire private debt spectrum North America-focused distressed debt America and Europe. After the credit ($126bn is focused on North America funds is $1.5bn, again the largest of all markets effectively dried up in 2008, the alone), it is clear that alternative lending strategies in the region, although this alternative assets investment community has become a substantial resource for fi gure falls to $1.3bn when excluding the increased its fundraising pace in order to companies of all sizes to meet diverse substantial $7bn target size of Oaktree capitalize on the attractive investment borrowing needs, both globally and in Opportunities Fund Xb, as shown in Fig. opportunities that emerged from the turn North America. 7. in the credit cycle. In 2016, it appears that institutional investors will continue The progression of the credit cycle Anchorage Capital Group is raising to access private debt strategies such will continue to dictate private debt Anchorage Illiquid Opportunities V, as distressed debt, as the traditional fundraising, as senior lending can its fi fth distressed debt fund launched banking system has not regained all of work together with subordinated debt since 2010, seeking the largest target the lending territory it occupied less than strategies to capitalize on opportunities at size of its fund series ($1.3bn). MHR a decade ago. a given point in the lending atmosphere. Institutional Partners IV is a solely North The vast amount of potential borrowers America-focused distressed debt fund In the past, one of the main in the US alone is enough to facilitate a targeting $2.8bn, and is the fi rst vehicle disadvantages of private debt investment much larger pool of lendable capital in from MHR Fund Management since the was the illiquidity of vehicles, but in both the distressed and direct lending third fund in this series in 2007. light of historically low interest rates segments. If private lenders continue in traditional credit markets, investors to provide successful services and Outlook have increasingly accepted illiquidity in fl exibility for small and middle-market exchange for the more attractive risk- borrowers, while returning positive As of May 2016, there is $72.9bn more adjusted yields offered by private debt results to investors, demand is likely to dry powder available in North America- investments. remain strong among borrowers, lenders focused private debt funds than there and investors. was in December 2006 (Fig. 8). The Given the sheer volume of capital 2.38x increase in capital available to currently available to private debt fund

Private Debt in Asia

Justin Hall takes a closer look at Asia-focused private debt fundraising, including funds closed in 2015 and those currently in market.

While the majority of private debt activity Forty-seven percent of Asia-focused Capital Management have started to has historically been focused on North funds closed in 2015 exceeded their initial establish joint ventures with local fi rms to America and Europe, data from Preqin’s target size. Of these funds, three focus gain access to the existing private lending Private Debt Online points to a growing primarily on Japan, and the remainder infrastructure in various Asian countries. market for alternative fi nancing in Asia. focus primarily on China, but with a wider AAM launched Adamas Ping An China As shown in Fig. 1, 17 private debt funds focus on Asia. Among funds that fell short Credit Fund, a joint venture with Ping An with a primary focus on Asia closed in of their initial target size, India, Singapore Trust, a subsidiary of Ping An Insurance 2015, securing $6.1bn in aggregate and South Korea were most commonly Group. The direct lending vehicle focuses capital. There are currently 20 funds in targeted, with just one such fund each on growth companies in Greater China, market targeting Asia, which are looking targeting Japan and China. specifi cally SMEs, and is looking to to raise more than $8bn collectively. capitalize on the budding awareness of As shown in Fig. 4, the majority of private debt fund managers’ abilities as 2015 was a signifi cant year for Asia- managers of Asia-focused funds are corporate lenders in the region. focused private debt fundraising; it located in Asia: 75% are based in India, recorded both the highest number of Hong Kong or Singapore, and the India is home to 40% of managers of funds closed and the most aggregate remaining 25% in the US and UK. These Asia-focused funds in market, indicating capital raised since 2012, continuing the statistics point to the importance of a increasing investor appetite and a upward trend of the past three years. thorough understanding and practical positive outlook from managers operating While still relatively small compared with knowledge of local legal and regulatory in the fast-growing market. These funds the North American and European private systems. are solely focused on investment in India, debt markets, Asia-focused fundraising again a refl ection of the importance of continues to grow as investors become To help mitigate these challenges, global local knowledge. As seen in Fig. 5, some more comfortable incorporating exposure fund managers such as KKR, Adamas of the largest private debt funds currently to the region in their portfolios (Fig. 2). Asset Management (AAM) and Babson in market are focused on investment

Fig. 1: Annual Asia-Focused Private Debt Fundraising, Fig. 2: Annual Private Debt Fundraising by Primary 2009 - 2015 Geographic Focus, 2011 - 2016 YTD (As at 17 May 2016)

60 20 19 56.9 53.7 18 17 50 46.7 16 15 North 14 No. of Funds 40 America Closed 35.8 12 30.6 30.6 Europe 10 9 30 Aggregate 8.0 8 22.8 8 Capital 6.1 Raised ($bn) 20 18.2 17.8 Asia 6 5 4 13 4 3.4 3.1 3.0 10 8 7.4 6.1 6.7 Aggregate Capital Raised ($bn) 2 0.8 0.8 3.1 3 0.8 0 0 0 2009 2010 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2016 YTD Year of Final Close Year of Final Close Source: Preqin Private Debt Online Source: Preqin Private Debt Online Fig. 3: 10 Largest Asia-Focused Private Debt Funds Closed in 2015

Fund Firm Vintage Fund Size ($mn) Strategy PAG Asia Special Situation Fund II PAG Asia Capital 2015 1,375 Distressed Debt Sunﬂ ower Fund China Merchants Capital 2015 1,094 Distressed Debt Hungkuk-Woori Senior Loan Private Special Heungkuk Asset Management 2015 563 Direct Lending Asset Investment Trust No. 1 ADV Opportunities Fund I ADV Partners 2014 545 Special Situations Shoreline China Value III Shoreline Capital 2015 500 Distressed Debt Nomura ICG Japan Fund Intermediate Capital Group 2014 377 Mezzanine Tokio Marine Mezzanine Fund Tokio Marine Mezzanine 2014 328 Mezzanine SSG Capital Partners IV SSG Capital Management 2015 325 Special Situations Olympus Capital Asia Credit I Olympus Capital Asia 2013 300 Direct Lending Mezzanine Fund No.3 Mizuho Capital Partners 2015 242 Mezzanine Source: Preqin Private Debt Online

in India across a range of fund types; Fig. 4: Location of Fund Managers Raising Asia-Focused Private Debt Funds (As however, May 2016 developments in at 17 May 2016) parliament may shift the balance to favour investors in India-focused distressed debt opportunities. The Indian Government has now passed a bankruptcy law which aims 5% to make it easier to dissolve the assets of a failing business and strengthen the 15% India rights of debtholders, which has long been an issue for potential investors. This Hong Kong development, along with the ongoing 40% pressure from the Reserve Bank of India for banks to reduce exposure to troubled US companies, may potentially create more opportunities for fund managers in the 20% Singapore distressed debt segment. While India is not the only Asian country in which UK investors are looking to invest in private debt, these steps by the government 20% could help to distinguish the country from its peers through the eyes of investors.

The increasing interest from fund Source: Preqin Private Debt Online managers and investors across Asia coincides with the recent pullback in institutions to work with private fi rms to to hold this privilege in China. These lending by banks in the region. Despite make it easier to access bank credit. This relationships, along with the CBRC traditional banks maintaining a relatively may indicate future intentions to push requirements, stress the importance of large role within lending in Asia, it is likely banks further into lending to Chinese having a ‘footprint’ in China when looking that private debt fi nancing options will companies looking for capital, which may to invest in distressed credit. continue to gain favour by offering fl exible potentially limit opportunities for private terms and loan servicing that could be investment. Given the growth in the number of more attractive to borrowers. Slowing Asia-focused funds in market – a 113% economic growth in China and other As of May 2016, 15% of Asia-focused increase from 2014 to 2015 – it is likely countries in Asia is also creating new funds in market target China specifi cally, that the region may be the next in line opportunities for private lending. In China, of which all managers are based in to benefi t from the development of the small and mid-sized companies have Hong Kong but maintain a presence in global private debt marketplace. For fund found it much harder to access credit China. As previously stated, AAM has managers looking to enter the region, through traditional lending channels, utilized joint ventures to gain access knowledge of local laws and regulations creating footholds for alternative lenders to the Chinese direct lending segment. will remain important, as is also the case to expand operations. Similarly, DAC Financial Management, throughout North America and Europe. which is raising DAC China Special Fund managers based in Asia will likely In May 2016, the China Banking Opportunity and Situation Fund II, has continue to manage the majority of funds Regulatory Commission (CBRC) put focused on distressed credit and special focused on the region, but, as funds measures in place to assist these small situations in China since 2002 via its continue to successfully reach targets, and mid-sized companies struggling subsidiary Gao Fei Consulting Services global managers may look to increase with problems resulting from insuffi cient Co Ltd. In 2005, Gao Fei was granted their exposure and coverage of Asia, too. lending to private enterprises. These an unlimited distressed asset servicing new regulations will require fi nancial license, making it the only foreign entity

Fig. 5: Largest Asia-Focused Private Debt Funds Currently in Market (As at 17 May 2016)

Target Primary Fund Firm Location Vintage Strategy Size ($mn) Geographic Focus Carlyle Asia Structured Credit Carlyle Group US 2014 Direct Lending 1,000 Asia Opportunities Fund Intermediate Capital ICG Asia Paciﬁ c Fund III UK 2015 Mezzanine 1,000 Asia Group Apollo Global Emerging Markets, IFC-Apollo Distressed Debt Fund US 2016 Distressed Debt 1,000 Management India Piramal India Resurgent Fund Piramal Capital India 2016 Distressed Debt 900 India KKR India Alternative Credit KKR US 2012 Mezzanine 750 India Opportunities Fund Australia, China, Clearwater Capital Special Clearwater Capital Partners Fund V Hong Kong 2016 650 India, South Asia, Partners Situations South Korea Adamas Asset Adamas Ping An China Credit Fund Hong Kong 2016 Direct Lending 500 China Management Source: Preqin Private Debt Online

PRIVATE NATURAL HEDGE FUNDS REAL ESTATE INFRASTRUCTURE PRIVATE DEBT EQUITY* RESOURCES INVESTOR COVERAGE 6,273 5,072 5,313 2,762 2,125 1,913 Active Active Active Active Active Active Natural Private Equity Hedge Fund Real Estate Infrastructure Private Debt Resources LPs Investors LPs LPs Investors $ Investors FUND COVERAGE 19,659 20,902 5,715 1,065 2,047 1,538 Private Equity PE Real Estate Infrastructure Private Debt Natural Hedge Funds Funds Funds Funds Funds Resources Funds

FIRM COVERAGE 10,049 8,278 3,443 493 966 809 Private Equity Hedge Fund PE Real Estate Infrastructure Private Debt Natural Firms Firms Firms Firms Firms Resources Firms

PERFORMANCE COVERAGE 6,304 13,800 1,491 214 734 429 Private Equity PE Real Infrastructure Private Debt Natural Hedge Funds Funds Estate Funds Funds Funds Resources Funds

FUNDRAISING COVERAGE 2,219 14,931 1,005 193 276 225 Private Equity PE Real Infrastructure Private Debt Natural Hedge Funds Funds Estate Funds Funds Funds Resources Funds

DEALS BUYOUT VENTURE CAPITAL INFRASTRUCTURE COVERAGE 47,163 + 21,337 101,846 + 11,809 12,925 Buyout Deals** Exits Venture Deals*** Exits Infrastructure Deals

Alternatives Investment Consultants Funds Terms Coverage: Analysis Best Contacts: Carefully Selected from Coverage: Based on Data for Around our Database of over 527 14,330 362,564 Consultants Tracked Funds Contacts + PLUS THE PREQIN DIFFERENCE Comprehensive coverage of: + Over 200 research, support and development staff + Placement Agents + Dry Powder + Global presence - New York, London, Singapore, San Francisco, + Fund Administrators + Compensation Hong Kong and Manila + Law Firms + Plus much more... + Depth and quality of data from direct contact methods + Debt Providers + Unlimited data downloads + The most trusted name in alternative assets

*Private Equity includes buyout, venture capital, distressed, growth, natural resources and mezzanine funds. **Buyout deals: Preqin tracks private equity-backed buyout deals globally, including LBOs, growth capital, public-to-private deals, and recapitalizations. Our coverage does not include private debt and mezzanine deals. 9HQWXUHFDSLWDOGHDOV3UHTLQWUDFNVFDVKIRUHTXLW\LQYHVWPHQWVE\SURIHVVLRQDOYHQWXUHFDSLWDO¿UPVLQFRPSDQLHV JOREDOO\DFURVVDOOYHQWXUHFDSLWDOVWDJHVIURPVHHGWRH[SDQVLRQSKDVH7KHGHDOV¿JXUHVSURYLGHGE\3UHTLQDUHEDVHG 2015 Annual CAIA Corporate on announced venture capital rounds when the capital is committed to a company. ZĞĐŽŐŶŝƟŽŶǁĂƌĚtŝŶŶĞƌ As at 1 June 2016 NEWS News Preqin Industry News Download Data

Preqin Industry News

We present the latest private debt news, including recently closed funds, investors seeking new commitments and funds currently in market.

Recently Closed Private Debt Funds Chart of the Month

Ten private debt funds reached a fi nal close between 1 April and Buyout Dry Powder by Fund Size, December 2003 - 18 May 2016. Of these, six primarily target the US, including May 2016 the largest fund closed during this period. Raised by Czech Asset Management (CAM), SJC Onshore Direct Lending Fund 250 III is a $1.7bn vehicle which surpassed its target size of $1.5bn and reached a fi nal close in May 2016. The fund is the third in 200 a series from CAM and focuses on fl oating-rate senior secured 187.9 loans to middle-market US-based companies with an EBITDA of $8-50mn. The next largest US-focused vehicle closed is BBH 150 149.5 Capital Partners V, a mezzanine fund managed by BBH Capital Partners, which closed on 20 April and secured $802mn, 100 103.4 surpassing its $600mn target size; the fund targets both equity

Dry Powder ($bn) 64.8 and debt investments. 50

Five of the 10 private debt vehicles closed since April 2016 0 employ a direct lending strategy, including the largest fund closed. The only venture debt fund to cap fundraising was 137 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Ventures III, which reached a ﬁ nal close on $200mn and is May-16 focused solely on opportunities in North America. Small Mid Large Mega

Europe-focused funds have also seen activity; Park Square Source: Preqin Private Debt Online Capital Partners held a fi nal close for Park Square Capital Partners III on €1.2bn, and will continue to invest in subordinated debt securities of large and mid cap companies in Europe. Our Chart of the Month shows buyout dry powder by Known investors in the fund include Ontario Teachers’ Pension fund size. Dry powder held in buyout funds globally is an Plan and Orange County Employees’ Retirement System. indicator of capacity for sponsor-driven transaction activity Other funds recently closed that focus primarily on Europe in the future, which would typically involve fi nancing support include HSBC Private Debt Fund of Funds, EQT Mid-Market via private debt funds. Small and mid-market buyout dry Credit Fund and European Capital Private Debt Fund. powder is the most relevant gauge for this relationship, and both categories hold substantial levels of dry powder. Mid cap buyout funds hold $103.4bn, while small caps hold Investors Targeting Direct Lending in Europe $64.8bn (as of 17 May 2016). If this available capital were to be put to work, it could have a profound effect on dry powder levels in the private debt asset class overall, as the Preqin’s Fund Searches and Mandates tool on Private Debt strategies have historically worked alongside one another Online pinpoints institutional investors based on recent fund towards the completion of leveraged buyouts. preferences communicated directly to Preqin’s global research teams. One of the most prevalent trends in private debt in recent months has been institutional investors targeting direct lending investments in the ripening European market. In early May, Asia-Focused Funds in Market Hamburger Pensionskasse von 1905 expressed a preference for Europe-focused direct lending funds on an opportunistic basis; the private sector pension fund invests in the asset class Private Debt Online tracks 21 Asia-focused private debt funds as part of its private equity allocation. currently in market, which represent the full range of private debt strategies. The largest fund currently raising capital is Indosuez Wealth Management, the Switzerland-based wealth Carlyle Group’s Asia Structured Credit Opportunities Fund, manager of approximately €100bn in assets and affi liate a direct lending vehicle targeting $1bn, which has already of Credit Agricole Group, has recently stated its plans for held a fi rst close on $236mn. The funds in market roster also investment in Europe-focused direct lending funds in the includes a mezzanine vehicle from Intermediate Capital Group, next 12 months, including those raised by both fi rst-time and a distressed debt fund from Apollo Global Management and a established fund managers. South Korea-based Mirae Asset special situations product from Clearwater Capital Partners. Life Insurance has also issued plans to invest in the coming year, specifi cally in senior debt strategies focused on Europe and North America.

Private Debt Investors

We examine investors in private debt by investment preferences, current and target allocations to the asset class and assets under management.

Geographic Preferences of Investors in Private Debt by Investor Location

EUROPE 4% NORTH AMERICA 4% ASIA 4%% 4% 4% 34% 57% 7% 19% 20%

73% 69% REST OF WORLD Geographic Preferences: North America 35% 40% Europe

5% Asia 19% Rest of World

Fig. 1: Investors’ Average Current and Target Allocations Fig. 2: Investors’ Average Current Allocation to Private to Private Debt by Investor Location Debt by Investor Type

14% 13% Bank/Investment Bank 951.4 Asset Manager 762.6 12% 12% Government Agency 743.6 Private Equity Fund of Funds Manager 646.2 10% Current Public Pension Fund 555.1 8% 8% Allocation Insurance Company 510.9 8% 7% 7% Private Sector Pension Fund 378.3 6% Superannuation Scheme 246.0 6% Target Family Office - Multi 176.6 Allocation 4% Family Office - Single 145.0 4% Wealth Manager 115.5 Listed Fund of Funds Manager 86.0 2% Corporate Investor 81.0 Endowment Plan 52.1

Allocation to Private Debt (As a % of AUM) 0% Foundation 38.6 North Europe Asia Rest of World 0 200 400 600 800 1,000 America Investor Location Current Allocation to Private Debt ($mn) Source: Preqin Private Debt Online Source: Preqin Private Debt Online Fig. 3: Strategy Preferences of Investors in Private Debt by Total Assets under Management Data Source: 35% 31% 30% 27% Preqin’s Private Debt Online contains detailed 25% 25% 25% 24% 23% information on more than 2,100 investors in private debt 20% 19% 19% around the world. 15% 14% 15% 12% Proﬁ les include information on current and target 10% 10% 7% 7% allocations to private debt, investment preferences, 6%6% 5% 4% 5%4%

Proportion of Investors previous fund commitments, key contact details and 5% 3% 3% 3% 2% much more. 0% $1bn or Less $1.1-7.5bn $7.6bn or More For more information, or to arrange a demonstration, Assets under Management please visit: Distressed Debt Mezzanine Direct Lending Special Situations www.preqin.com/privatedebt Private Debt Fund of Funds Real Estate Debt CLO Venture Debt

Source: Preqin Private Debt Online

We analyze distressed debt fundraising by geographic focus and proportion of target size achieved, as well as funds currently in market.

Fig. 2: Proportion of Aggregate Capital Raised for Fig. 1: Annual Global Distressed Debt Fundraising, Distressed Debt Funds by Primary Geographic Focus, 2006 - 2016 YTD (As at 17 May 2016) 2010 - 2016 YTD (As at 17 May 2016)

50 1% 1% 45 44.3

40 38.6 5% 35 35 No. of Funds North America 29 Closed 30 28.2 28 26.7 Europe 25 25 25 26.0 25 22 23.0 21.5 Aggregate 28% 20.9 20 20 Capital Asia Raised ($bn) 15 14 Rest of World 10.5 11 10 8.2 65% 4.3 Diversified 5 3 Multi-Regional 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD Year of Final Close Source: Preqin Private Debt Online Source: Preqin Private Debt Online

Fig. 3: North America-Focused Distressed Debt Funds Closed by Proportion of Target Size Achieved, 2010 - Fig. 4: Distressed Debt Funds Currently in Market by 2016 YTD (As at 17 May 2016) Primary Geographic Focus (As at 17 May 2016)

100% 70 8% 6% 65 13% 90% 21% 27% 60 80% 41% 50% No. of Funds 70% 50 in Market 32% 54% 47% 41.4 60% 27% 40 50% 100% 18% 30 Aggregate 40% 17% 16% Target 8% 18% 30% 20% 8% 20 Capital ($bn) 18% 9% 20% 21% 23% 10 Proportion of Funds Closed 7% 10 6.7 8 25% 10% 2.4 18% 18% 13% 1 11% 8% 0.1 0% 0 2010 2011 2012 2013 2014 2015 2016 YTD North Europe Asia Rest of World America Year of Final Close Less than 50% 50-99% 100% 101-124% 125% or More Primary Geographic Focus

Source: Preqin Private Debt Online Source: Preqin Private Debt Online

Fig. 5: Five Largest Distressed Debt Funds Currently in Market (At at 17 May 2016)

Target Size Primary Fund Firm Vintage Fund Status ($mn) Geographic Focus Oaktree Opportunities Fund Xb Oaktree Capital Management 2015 Third Close 7,000 North America Centerbridge Special Credit Partners Centerbridge Capital Partners 2016 Raising 3,500 North America III-Flex Cerberus Institutional Partners VI Cerberus Capital Management 2016 Raising 3,000 North America Oaktree Opportunities Fund X Oaktree Capital Management 2015 Third Close 3,000 North America Sankaty Credit Opportunities VI Bain Capital Credit 2015 Second Close 3,000 North America

Source: Preqin Private Debt Online

10 Private Debt Spotlight / June 2016 © 2016 Preqin Ltd. / www.preqin.com   The Facts Fund Manager League Tables: Asia & Rest of World Download Data  Fund Manager League Tables: Asia & Rest of World We present fund manager league tables across the Asia & Rest of World region, including total funds raised in the last 10 years and estimated dry powder.

Fig. 1: Asia & Rest of World - Distressed Debt: Five Largest Fund Managers by Aggregate Capital Raised in the Last Fig. 2: Asia & Rest of World - Distressed Debt: Five Largest 10 Years Fund Managers by Estimated Dry Powder

Aggregate Capital Raised in Estimated Dry Powder Firm Firm Last 10 Years ($mn) ($mn) PAG Asia Capital 2,275 PAG Asia Capital 1,215 ADM Capital 2,106 China Merchants Capital 966 China Merchants Capital 1,094 Shoreline Capital 75 Shoreline Capital 981 How Asset Management 44 RISA Partners 550 RISA Partners 27

Source: Preqin Private Debt Online Source: Preqin Private Debt Online

Fig. 3: Asia & Rest of World - All Private Debt: Five Largest Fund Managers by Aggregate Capital Raised in the Last Fig. 4: Asia & Rest of World - All Private Debt: Five Largest 10 Years Fund Managers by Estimated Dry Powder

Aggregate Capital Raised in Estimated Dry Powder Firm Firm Last 10 Years ($mn) ($mn) PAG Asia Capital 3,075 PAG Asia Capital 1,642 ADM Capital 2,106 China Merchants Capital 966 SSG Capital Management 1,740 SSG Capital Management 763 Zhongchen Fund Management 1,578 Heungkuk Asset Management 495 Clearwater Capital Partners 1,368 AION Capital Partners 487

Source: Preqin Private Debt Online Source: Preqin Private Debt Online

Data Source:

Preqin’s Private Debt Online currently tracks 965 private debt fund managers worldwide, including information on funds closed historically and currently in market, strategic and industry preferences, direct contact details for key decision makers and more.

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