PAG raises one of Asia’s largest private debt funds

Private credit has become the preferred source of deal financing for Asia-Pacific’s private equity community this year, according to a recent Dechert report.

PAG, the pan-Asian alternatives giant, has closed one of Asia-Pacific’s largest private debt funds to date.

The Hong Kong-headquartered firm closed PAG Loan Fund V at its $2.6 billion hard-cap, per a Tuesday statement. The vehicle had a $2.5 billion target and launched in May 2021, according to Private Debt Investor data.

Fund V secured commitments from more than 20 institutional investors globally, the statement said.

This latest fund is roughly 70 percent larger than its 2019-vintage predecessor, which closed on $1.5 billion in June 2020. That vehicle included commitments from San Francisco Employees’ Retirement System and Florida Retirement System Trust Fund, PDI reported at the time. San Francisco re-upped to Fund V, according to PDI data.

Fund V is expected to invest across Japan, China, India, Australia and South Korea.

The vehicle is part of PAG’s private debt strategy, which aims to provide tailored financing solutions to corporates across the Asia-Pacific region. Its financing types include asset-backed loans, pre-IPO financings, secondary debt purchases, convertible bonds and others, with terms range from three months to seven years, according to the firm’s website.

PAG had more than $50 billion in assets under management as of 30 June across credit and markets; private equity; and real assets.

Private credit became the preferred source of deal financing for the Asia-Pacific private equity community this year, according to law firm Dechert’s 2023 Global Private Equity Outlook. Nearly two-thirds (60 percent) of Asia-Pacific GPs now use private credit more than traditional bank financing for buyout transactions, compared with 52 percent of EMEA managers and just 42 percent in North America.

Reasons for this shift included greater flexibility on financing terms, including financial covenants; higher leverage levels; and greater predictability with private credit.