The BRJ China Credit Fund, in which AIM-quoted Adamas Finance Asia (ADAM) has invested $800,000, has achieved a gross internal rate of return of 28.19 percent with its latest exit.
Managed by ADAM’s Hong Kong-based investment manager Adamas Asset Management, BRJ extended $521,000 to a natural resource trading company to cover an oil trading arrangement called Project Innovation. The deal was structured by the BRJ fund and launched in 2013 by Adamas.
ADAM chairman John Croft said in a statement announcing the exit: “In line with the strategic repositioning of the company, we are continuing to plan the orderly disposal of our existing asset portfolio to generate cash for investment in high-yield corporate lending in Greater China, where a large number of opportunities such as Project Innovation exist.”
Adamas provides capital to Chinese small- and medium-sized enterprises in need of short-term bridging finance not easily available within the Peoples Republic of China. “More than 90 percent of such companies have difficulty in obtaining bank funding,” the firm said.
The collateral backing Project Innovation is a convertible bond issued by a Hong Kong main-board listed company with an overall loan to value ratio of 20.55 percent, further underpinned by a personal guarantee from one of the main shareholders of another Hong Kong main-board listed company with current market cap of around $1 billion. The loan was for three months but the borrower opted for an early repayment option two months from drawdown.
The full repayment of the Project Innovation loan brings the non-weighted average IRR achieved from project exits by BRJ since ADAM first invested in April 2014 to 36.08 percent. The fund has targeted annual returns of 24 and 30 percent. Fully repaid loans so far amount to $4.8 billion. BRJ plans to invest $50 million with the objective of distributing an annual dividend of 8 percent payable semi-annually.
The latest exit has increased BRJ’s net asset value and the cash generated is available for future investment.