Dignari holds final close of second China credit fund on $626m

The fund has already deployed more than $300 million and wants to focus on providing downside protection in an uncertain environment

Dignari Capital Partners on 8 April held a final close, on $626 million, of its second China-focused credit fund, a spokeswoman for the Hong Kong-based private credit investment manager confirmed to PDI.

She added that the DCP China Credit Fund II had deployed more than 50 percent of its committed capital as of 8 April. It has a five-year fund life with a target gross IRR of 20 percent.

As PDI reported, the fund held an interim close on $476.5 million in January. This followed its first close on $262.2 million in January 2018.

Dignari garnered $256.1 million for its first China credit vehicle, DCP China Credit Fund I, in December 2014, according to a regulatory filing with the Hong Kong Stock Exchange.

When asked if Dignari’s existing LPs were now requiring any changes in investment strategies or required return rates, compared with 2014 when the predecessor fund reached its final close, the spokeswoman said: “They still view Asia as a less efficient market where they can get better risk-adjusted returns. LPs are not really asking for high returns. However, they are keen on better downside protection, given that we live in a higher-risk environment today.”

The firm makes credit investments of between $25 million and $100 million per transaction. Its investment team prefers bespoke lending opportunities with offshore collateral and creditor protection in developed jurisdictions.

According to a Hong Kong Stock Exchange filing on 19 December 2018, Grace Tan, Dignari’s chief investment officer who oversees the firm’s China special-situation and structured credit investment activities, exercised derivative interests and acquired shares in Zhongchang International Holdings Group. The Hong Kong-based investment holding company manages property leasing, development, and project management in China.

DCP China Credit Fund I has interest in 76.2 percent of the shares in Zhongchang International, an increase from 3.03 percent prior to the transaction. This is because a Hong Kong-based real estate development company, Sansheng Hongye, pledged ordinary shares in Zhongchang International and convertible bonds issued by the latter company for a loan facility granted by the fund via its special purpose vehicle, Dragons 616 Limited, a British Virgin Islands-registered company. However, the company’s spokeswoman said that this was not a typical investment for the firm