China distress specialist Shoreline closes Fund III at $500m

Approximately half of Fund III has already been invested across several transactions and there are almost 1,000 non-performing loans (NPL) in the portfolio. In addition to NPLs, Shoreline targets distressed and non-distressed opportunities that generally arise from inefficiencies in China's financial system.

The private equity firm's previous fund, Shoreline China Value II, closed in March 2013 at $303 million. It followed a $178.2 million debut vehicle, raised in 2008.

The investor base for Fund III is drawn from the US, Canada, Europe and Asia, with government and private pension funds featuring most prominently. Commitments also came from endowments, foundations, insurance companies, family offices and high net worth individuals. Several of the endowments and foundations have backed Shoreline since Fund I.

The decision to raise an overflow fund came after the GP found it had more than enough opportunities in which to deploy the $500 million corpus. It went back to investors and invited them to increase their allocations. The overflow fund is expected to reach a final close of $200 million within a month.

Many of these opportunities stem from the explosion in credit growth that began in late 2008 and the more recent slowdown in economic growth. At the same time, China's banks are becoming more market-oriented and the government is pushing ahead with reforms, which suggests that NPLs are increasingly likely to be resolved through private sector mechanisms.

"The build-up of NPLs from the lending boom between 2009 and 2011 was unprecedented. When growth started to slow and those loans came due, NPLs surfaced. Encouraged by the government and banking regulations, Chinese banks have started transferring NPLs in large quantities. The speed at which Fund III is being deployed is due to this new wave of NPLs," Ben Fanger, co-founder and managing partner at Shoreline, said in a statement.

Shoreline was founded in 2004 and manages close to $1 billion of capital in portfolios of NPLs, restructured single credits, and special situation financings. It has more than 30 professionals in China. Prior to raising its first fund, the GP sourced and serviced over $1.6 billion of Chinese NPLs in one-off deals for third-party investors.

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• Topics
• Fundraising
• Credit/Special Situations
• Greater China
• Distress
• China
• Shoreline Capital Management
• Fundraising