Babson to incrase Asia-Pacific lending

The asset management firm will double or triple its lending to Asia Pacific in the coming years, Michael Hermsen, the head of Babson Capital's global private finance group, told Bloomberg.

Babson, which has $149 billion in assets under management globally, has a portfolio of about $700 million in Asia and Australia divided between leveraged loans, subordinated debt and private equity.

"Many banks are withdrawing from their Asian outposts," said Hermsen. "Spreads exceed the returns we can get for comparable credits in other parts of the world."

According to the Bank for International Settlements, global banks reduced cross-border lending to companies, governments and each other at the fastest rate since 2008 in the final quarter of 2011. The Reserve Bank of Australia notes that European banks scaled back lending in Australia to around a quarter of outstanding syndicated debt, from more than 33% in 2008.

As the region's leading market for leveraged buyouts, Australia is a key focus for Babson's mezzanine operations. While the withdrawal of European banks has created more mezzanine opportunities, intercreditor principles have been a point of tension. Australia's major senior lenders proposed a standardized approach but it was rejected by subordinated debt providers like Babson.

Last November, Babson hired Vik Thadani to assist with the firm's Asia Pacific strategy as a managing director in its mezzanine and private equity group. Though based at Babson's Los Angeles office in the US, Thadani provides operational and transactional support to investment executives in Sydney and Hong Kong.

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• Topics
• Restructuring
• Australasia
• Greater China
• Australia
• Hong Kong (China)
• Leveraged finance