News & Analysis

Cordiant holds first close on $250m for latest fund

High economic growth and low levels of corporate debt mean high quality lending opportunities in emerging markets are abundant, argues chief executive David Creighton.

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Emerging markets-focused debt provider Cordiant Capital has held a first close on $250m for its latest debt fund, the firm said in a statement. 

The fund, Cordiant Emerging Loan Fund IV, is understood to be aiming for up $1 billion. In line with previous Cordiant vehicles, it will focus on issuing senior secured loans to borrowers in emerging markets.

A large number of existing investors in the firm’s previous funds re-upped, whilst a number of new LPs came in ahead of the first close, Cordiant chief executive David Creighton confirmed.

“The two biggest economic stories of the last five years–the banking crisis in the West and the growth of the emerging markets–have shifted the supply/demand drivers in favour of emerging market loans,” Creighton commented.

“While the reduction in lending by Western banks to the emerging markets since the credit crunch has pushed up the interest rate that borrowers are willing to pay for loans, the yields on other competing emerging market asset classes, such as bonds, have tumbled,” he added.

Cordiant has been investing in emerging market debt for 12 years, ploughing almost a lone furrow in its early days. Its experience of the market has allowed it to build a strong pipeline of deals for the new fund, Creighton said, and the firm intends to being putting capital to work immediately.

High levels of economic growth in emerging markets coupled with low levels of corporate leverage make for an attractive investment proposition, he added.  Cordiant has historically achieved a very low default rate on loans it issues by structuring them with investor-friendly covenants, ensuring they have preferred creditor status, and partnering with international finance institutions such as the IFC. Across a Cordiant fund portfolio, risk is further mitigated by the wide diversification along sector and geographical grounds.

The fund is targeting an all-in gross spread over LIBOR of between 450 and 650 bps, about 200 to 250 bps higher than was available on comparable loans pre-crisis, the firm said.