US Golub Capital’s $2 bn debt fund may raise over $40 mn from Korea

South Korean brokerage firm Shinhan Investment Corp. and a retirement savings fund have decided to commit $20 million each to a $2 billion private debt fund of US-based credit asset manager Golub Capital, with Korea Scientists and Engineers Mutual-aid Association (SEMA) contemplating participating in the fund.

Golub has already raised more than $1.6 billion for the debt fund globally to finance part of private equity takeovers of US mid-market companies.

Shinhan Investment, a placement agent of the debt fund, will use its own capital for the $20 million commitment according to investment banking sources on Sept. 4.

It is not known yet how much SEMA is considering committing to the fund.

The debt fund will issue collateralized loan obligations (CLOs) backed by the loans and use the leverage for additional lending to beef up returns.

Golub, with $21 billion of capital under management, specializes in US middle market lending and syndicated loans. It arranges credit facilities of up to $750 million to US middle market companies.

“It is appealing that its existing funds recorded double-digit internal rates of returns,” said one of the sources.

While the debt fund is on track to reach its fundraising goal,  other South Korean institutional investors show tepid interest in the debt fund.

Some of them have already reached their target allocations for private debt funds this year, after committing to debt funds of large-sized private equity houses such as Guggenheim and Park Square Capital.

They also feel unfamiliar with the strategy of Golub Capital’s debt fund of issuing CLOs to increase its leverage ratio.

Earlier this year, South Korea’s leading asset owners told the Korean Investors in a poll that they planned to expand private debt investment this year in search of medium risks and medium returns amid expectations of interest rate increases.

By Daehun Kim

daepun@hankyung.com