LPs buy into SSG’s special sits story

"We have been very clear to our LPs that this is not just another private debt fund. Most of these deals include debt and downside protection and equity upside, but our transactions tend to be a lot more structured," says Edwin Wong, managing partner and CIO at SSG. "We are not just looking at collateral but a series of credit enhancements that make sure the downside is locked up."

These enhancements vary as widely as the nature of the deals they underpin.

While SSG does provide growth capital to companies that are overlooked by banks, its specialty is restructuring - unraveling the balance sheets of healthy companies hamstrung by shareholder disputes and either triaging distressed assets or picking up the pieces post-bankruptcy filing. Its interests may be protected by board seats and associated rights - advantages usually not afforded to typical direct lenders - taking control of a company's cash accounts, or obtaining other forms of credit support from related parties.

Based on the ramp up in SSG's fund sizes, there are sufficient enhancements to make LPs comfortable. The PE firm, which was set up by the team that used to run Lehman Brothers' Asia special situations business, closed its debut fund at around $100 million in late 2010, although capacity was boosted by co-investment.

Fund II received commitments of $400 million in 2012 and now Fund III has closed at $915 million. Demand was well in excess of $1 billion.

"We had the opportunity to include some of the biggest names in the LP market, such as state pension funds from the US and sovereign wealth funds - people that would not look at a $400 million fund," says Wong. He adds that Fund II is over 100% drawn and, because most transactions are debt-based, it is has been making strong distributions.

A majority of the new vehicle is expected to be deployed in SSG's core geographies of India, China and Indonesia. India has been the most active market for Fund II but China is likely to feature more prominently in Fund III as the slowing economy leaves companies exposed.

Wong told AVCJ after raising Fund II that the process was complicated by the need to educate investors as to what special situations means in Asia. He notes that defining the opportunity set remains an issue, but receptiveness to special situations and credit strategies has improved in the last two years.

"Investors used to be only focused on equity strategies in Asia but now that is changing" he explains. "It is a function of the slowdown in the economy and the lack of performance by many GPs on the traditional equity side. LPs are re-thinking their strategies."

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• Topics
• Credit/Special Situations
• Fundraising
• SSG Capital Partners
• Asia
• Distress
• Fundraising