Dignari nears $500m China debt fund target – exclusive

The Hong Kong-based credit manager has raised $400m so far for its second China-focused credit fund.

Dignari Capital Partners, a Hong Kong-based private credit investment firm, has raised $400 million so far for its second China-focused debt fund, a spokesperson from the firm confirmed with PDI.

The DCP China Credit Fund II was officially launched in 2017 with an initial $500 million fundraising target. In January, the fund garnered $262.2 million at first close from at least six investors, according to a SEC filing. PDI understands that all investors in the predecessor fund have agreed to invest in the DCP China Credit Fund II.

According to the spokesperson, the firm is set to raise another $50 million from new investors by the end of June. The timeline for the final close was not disclosed.

“Probably, we can put more money to work, exceeding our target of $500 million, as the fund does not have a hard cap and the capacity is driven by the opportunity set. Currently, the pipeline is very robust,” the spokesperson said.

Fund II has a mandate for special situations and distressed debt investing both in China and offshore markets. In 2016, the manager executed a $103.5 million sponsored mezzanine debt financing deal, as per PDI reporting.

The typical ticket size of investments made via the fund is expected to be in the range of $25 million to $75 million, according to the spokesperson. As the fund has a capital recycling allowance, the manager can make up to 15 investments. The fund has a three-year investment period and a five-year life.

Dignari provides direct lending to companies that face funding difficulties. “It does not have to be a distressed situation,” the spokesperson noted.

PDI understands that Fund II has started deploying the committed capital since January.

Meanwhile Fund I, which raised $256 million in December 2014, has finished its investment period, which was from December 2014 to November 2017, but is still in the process of exiting investments.

The DCP China Credit Fund series target gross IRRs of 20 percent on a fund level.

To achieve these returns, the firm sometimes structures debt instruments that have options to convert to equities or charges borrowers a higher interest rate ranging from 10 to mid-teens, the spokesperson said.

Dignari Capital Partners has more than 15 years of experience investing in China and offshore markets. The firm spun out in 2014 from ADM Capital (formerly called Asia Debt Management Hong Kong Limited), a Hong Kong-headquartered investment manager founded in 1998.