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Korea Post awards $300 mn mandates to 3 private debt managers

Nov 18, 2016 (Gmt+09:00)

Korea Post’s savings arm has awarded offshore private debt mandates worth a combined $300 million to Guggenheim Partners, Park Square Capital and Partners Group, as the savings unit is stepping up investment in private debts.

The three asset management firms will receive $100 million each from the postal service which targets an annual return of about 6%, said a Korea Post source on Nov. 17. They reportedly will focus on secured senior debts.

The mandates are separate from Korea Post's request for proposal posted in August to select three asset managers to invest in debt tranches of collateralized loan obligations (CLOs).

“We expect about a 6% return from this investment,” the source of the Korea Post’s savings unit told the Korea Economic Daily. “We will continue to expand investments in offshore private debt funds.”

The state-run agency expects that private loans will increasingly fill the void left by banks in the debt financing market, as banks are under pressure from tightened capital rules such as Basel III. Also, private debts are considered as low-risk, fixed-income sources compared to equities, after record-low interest rates have inflated asset values.

This year Korea Post had raised its investment limit for U.S. CLO and commercial mortgage-backed securities (CMBS) to $800 million, and revised internal regulations to shorten the investment review process for CLO and CMBS.

“They will form investment pools of various strategies … in consideration of the nature of Korea Post’s savings assets which have low borrowing costs and short duration of liabilities,” MoneyToday, an online news outlet, cited an unnamed Korea Post source as saying, in reference to the three private debt management firms.

New York-based Guggenheim is known to have expertise in mid-market company loans, with over 150 employees dedicated to private debt business. The asset manager had sold $200 million worth of CLOs to South Korean insurance companies and savings funds out of the total $500 million CLOs it had issued earlier this year.

Park Square, an independent investment firm based in London, is one of the biggest non-bank lenders to private equity in Europe with about $5 billion under management. Earlier this year the private debt investor had raised a €1.2 billion debt fund to invest in subordinated debt, according to a Financial Times report in April.

Switzerland-listed Partners Group manages $55 billion in assets and has an office in South Korea.

By Donghun Lee

Yeonhee Kim edited this article

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