SSG targets wider array of distressed sellers for Fund V

The fund reached a first close of $610 million in January and had received commitments of $1.36 billion as of May, according to information disclosed by Pennsylvania Public School Employees' Retirement System (PSERS). A final close is expected in the third quarter. SSG is also raising a sidecar of approximately $750 million that will invest alongside the main fund in larger deals. It was on $475 million as of May. PSERS wants to invest $150 million in each vehicle.

Distressed investments will account for around 60% of Fund V on the back of a tightening credit environment and the reduced ability of banks to hold illiquid assets. The distress opportunity in India is well documented, with the central bank putting pressure on lenders to recognize and sell non-performing loans (NPLs) and insolvency legislation set to drive corporate restructuring activity.

More NPL sales are expected to come in China as part of government efforts to reduce corporate debt levels, impose stricter underwriting standards in banks, and get asset management companies to clear up their portfolios. There is also a growing NPL problem in Thailand, while weaker corporate balance sheets in Indonesia and Thailand have created investment opportunities.

Commercial banks and asset reconstruction companies are the traditional sellers of distressed assets in Asia, as single credits or concentrated pools. However, SSG expects alternatives managers and investment banks to offload assets as well, largely in response to regulatory pressure, the PSERS document notes.

The remaining 40% of the fund corpus has been earmarked for special situations investments. These tend to be in the form of financing for small and medium-sized enterprises that struggle to access Asia’s bank-led lending market. These companies receive only 18.7% of bank lending despite accounting for 42% of the region’s GDP, according to the Asian Development Bank.

India has historically been SSG’s most active geography, and this is expected to remain the case. India, China and Southeast Asia together will receive up to 85% of the corpus. The private equity firm will make 20-25 investments in total, committing $50-100 million per deal. Its investment team comprises 38 professionals spread across nine offices in the region. The GP also has dedicated asset management companies that provide financing in certain geographies.

SSG’s total assets under management stand at $4.5 billion, comprising $3.2 billion in special situations and distress funds and $1.3 billion in secured lending vehicles. Fund IV closed at $1.7 billion in December 2017 – $1.2 billion for the main fund and $500 million for the co-investment sidecar. It was 78% deployed as of December 2018. The firm’s second secured lending fund closed at $815 million in August 2017.

The SSG team originally ran the Asia special situations group at Lehman Brothers. Fund I closed at just over $100 million in December 2010, although co-investment by LPs took the total deployed to around $300 million. A second fund of $400 million came in late 2012 and then the firm raised $915 million within five months – beating a target of $800 million – for Fund III in 2014. A year later, the first secured lending fund closed at $325 million.

Other disclosed commitments to SSG Capital Partners V include Virginia Retirement System and San Francisco Employees’ Retirement System, AVCJ Research’s records show.

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• Topics
• Fundraising
• Credit/Special Situations
• GPs
• Restructuring
• Southeast Asia
• Asia
• India
• China
• SSG Capital Partners
• Distress