Tor Investment Management, a Hong Kong-based alternative credit manager, has garnered over $1.1 billion for the Tor Asia Credit Fund vehicle as of 17 July, a Securities and Exchange Commission filing shows.
The vehicle was launched in June 2013. The firm declined to comment on the fundraising and its assets under management, it is understood that overall AUM is roughly $1.6 billion, taking into account capital commitments to its open- and closed-ended vehicles and co-investments.
The firm has three strategies: acquiring loans and bonds in the secondary markets, making customised private loans to corporates sourced on a proprietary basis and participating in the syndicated loan markets led by third parties such as investment banks. It has investments in 11 different sectors across 21 countries, including cross-border transactions.
Tor’s typical transaction on the private debt side is a mid- to high-teen yielding loan product that is structured on a customised basis, usually for a short-term borrowing tenor of one to three years. These loans have a mixture of return components that can include an up-front fee, cash coupon, non-cash interest, and a ‘make-whole’ call provision. The firm also takes part of its economics through warrants or other equity participation.
These structures and return criteria are referred to in the latest report published by industry body Emerging Markets Private Equity Association. Its May report explained what the typical structure of private credit transactions are in the emerging markets including large Asian countries such as India and China: namely, a mix of contractual- and performance-based return components.
According to the report, the contractual component can consist of a negotiated interest rate – or ‘cash pay’– which is often based on the securities’ seniority. These privately placed loans may also be linked to payable-in-kind structures, or attached to an amortisation schedule, or with the flexibility to make a bullet payment at the end of the term.
The performance-based component is mainly in the form of an equity kicker. For example, investors may agree to warrants so that they can purchase equity in the company at a fixed price until a designated point in time; or, they may choose to convert their notes into equity. In other instances, investors may use a profit-sharing structure or covenants that guarantee a dividend if a performance threshold is reached.
Chris Mikosh, a Hong Kong-based portfolio manager and co-founder of Tor Investment Management, told Private Debt Investor that in a world where most private lending has significantly tightened, investors should take a close look at tenor and its link to discrete jumps in risk due to disruptive industry and structural changes.
He added: “The key to successful deals in Asia is clearly an intense focus on structuring along with deep due diligence to mitigate jurisdictional risk as well as bad actor risk, but unlike many mature markets, you can extract high-teen returns for one- to three-year deals in Asia, successfully mitigating many of these more profound industry changes.”
The firm was co-founded by Chris Mikosh, the former managing director of Goldman Sachs’ Asian Special Situations Group and Patrik Edsparr, the former head of global fixed income and chief executive officer of Citadel Europe.