Keppel Buys Out Clifford Capital Stake in Private Debt Specialist Pierfront

Keppel Corporation has taken full ownership of private credit specialist Pierfront Capital Fund Management for an undisclosed sum as the Singapore-listed conglomerate gears up for a bigger role in Asia’s debt scene.

Keppel took over the eight-year-old firm by purchasing the 50 percent of Pierfront which it did not yet own from its Temasek Holdings stablemate Clifford Capital Holdings. The deal, which was announced on Monday, expands Keppel’s opportunities to provide private credit to real estate, real asset and infrastructure ventures.

“We believe that the private credit asset class holds promising long term growth potential especially in today’s volatile economic landscape and tighter credit markets,” Christina Tan, chief executive officer of fund management and chief investment officer at Keppel said in a statement. “We are enthusiastic about opportunities in the Asia-Pacific region, where we see a growing number of companies seeking specialised intermediate capital solutions.”

With interest rates rising globally, private lending strategies have been gaining traction with fund managers in the region, with Gaw Capital Partners said to be including structured credit in its Gateway Real Estate Fund VII, which closed on $3 billion in June, and TPG having named Angelo Gordon’s strength in the sector as part of the rationale for its $2.7 billion buyout of Angelo Gordon announced in May.

Try Before You Buy

Keppel and Clifford each contributed $100 million to the Keppel-Pierfront Private Credit Fund, which reached a final close on $700 million in equity during October of last year. To date, Pierfront has deployed all of the $700 million raised for that vehicle via 16 transactions.

Joining the Temasek teammates in the fund were investors including Canadian financial services giant Manulife, Alberta pension fund manager AIMCo, China’s Asian Infrastructure Investment Bank, American asset manager GCM Grosvenor and Malaysia’s Affin Hwang Asset Management.

Beyond real estate, Pierfront targets investments in energy, transportation, telecommunications and social infrastructure, as well as logistics, as it looks to fulfil funding requirements not met by traditional commercial banks.

The 2022 fund was a follow-up to Pierfront’s first vehicle, Pierfront Capital Mezzanine Fund, which deployed $400 million across 15 investments, including a $50 million term loan facility to pan-Asian data centre operator Chindata Group. Temasek and Sumitomo Mitsui were among the backers of that vehicle.

Pierfront was founded in 2015 as a joint venture between Clifford and Japanese giant Sumitomo Mitsui, along with other minority shareholders. Keppel purchased its initial half-stake in the company in 2020 for $7.8 million with Clifford having retained the remaining 50 percent.

A Keppel representative declined to disclose the amount it paid for the remaining half-stake in Pierfront, but the company said the investment will not have a material impact on the firm’s earnings per share nor on its net tangible assets per share.

Private Debt Gains Momentum

APAC’s private lending market is becoming more attractive to investors seeking higher risk-adjusted returns compared to equity investments as interest rates rise, according to Paul Brindley, JLL’s head of debt advisory for the region.

In real estate, Brindley pointed to Australia and South Korea as the most popular markets for private credit as commercial banks take a step back, while the living and logistics sectors were some of the most favoured asset classes among investors.

Last week Goldman Sachs Asset Management (GSAM) and the Ontario Municipal Employees Retirement System (OMERS) revealed an APAC-focused private credit partnership with a focus on senior direct lending.

Also benefitting from the shift to lower-risk loan deals is Blackstone, which saw cash commitments to its primary private credit fund rise 30 percent in the third quarter, compared to the preceding three months, to reach $2.4 billion, according to a Bloomberg account. In December PAG reached a final close of $2.6 billion on its fifth private lending fund.

Trimming China Exposure

On the same day that Keppel announced its Pierfront takeover, the company disclosed to the Singapore exchange that it is selling its stake in a residential joint venture in Chengdu with Chinese developer China Vanke “to unlock value that can be invested to pursue new opportunities.”

Keppel agreed to sell its 35 percent interest in the V City development project in the capital of Sichuan province to Vanke for RMB 504 million ($69.95 million).

The Singaporean firm said it achieved an after-tax profit of S$57 million prior to selling its piece of what remained of the project after selling out all 5,399 residential units and 356 street-front shops in the development.

Completed in 2020, V City’s remaining assets consist of car parking and a market with the partners having first announced the RMB 4.88 billion project in 2015. In 2021, Keppel’s China property unit disposed of its stake in a separate Chengdu residential JV with Vanke for a total consideration of RMB 1.6 billion.

The two property heavyweights first entered into a strategic alliance in 2013 to develop properties in their home countries of Singapore and China.