Hong Kong-headquartered investment manager ADM Capital has secured a $100 million seed commitment from the Asian Infrastructure Investment Bank, to launch a closed-end US dollar-denominated debt fund.
The ADM Capital Elkhorn Emerging Asia Renewable Energy Fund, the firm’s 10th direct lending private credit vehicle, is targeting the Asian renewables sector with medium-term, senior and subordinated debt financing for renewable energy projects and developers, the firm said. It is targeting a final close of $500 million in 2021.
“We believe the alternative energy market for private sector lending is set to grow substantially, with fossil fuels facing headwinds as climate change rises on the agenda,” Christopher Botsford, co-founding partner and joint chief investment officer, said during Infrastructure Investor’s Asia Summit this week.
“We’re looking at the big picture of emerging Asia renewables, which we expect will experience massive growth over the next 10 years. We see the opportunity to introduce more tailored versions of private lending to this new and expanding market.”
Botsford also said the firm sees the partnership with AIIB having a catalytic effect on reassuring other investors that the fund will follow their stringent ESG guidelines.
“At the moment, it’s very difficult for institutional money to get involved in this sector because the loans are typically fragmented. They’re small and they’re complicated to structure,” he explained. “But if we can streamline, for example PPAs, then we envisage packaging out portfolios of these smaller loans and securitizing them.”
ADM Capital has about $2.5 billion in assets under management, a quarter of which is in sustainable agriculture. It has integrated sustainability into the underwriting process, making renewable energy credit “the natural strategic expansion”, according to the firm.
Since 2004, when ADM Capital began to shift focus from a distressed debt strategy to a private credit strategy, it has provided approximately $4 billion of debt capital in over 150 transactions across 14 countries with SMEs and other regional corporates, Botsford told Infrastructure Investor.
“Private, bespoke, bilaterally negotiated, secured credit is ADM Capital’s core focus in Asia. In a region with so much liquidity, it is odd there is strong demand for capital outside traditional financial institutions, but we see wide, uncatered gaps in the credit markets created by structural barriers. While our core focus in credit is sector agnostic, we embrace a strong ESG ethos and make high sustainability demands of our borrowers. We believe this makes for better risk management,” he said.
In July, the firm hired Nicolas Le Clerc as managing director, renewable energy. Le Clerc was an energy banker in Asia for over 18 years and brings ADM renewable energy financing experience and sector relationships. The firm also recruited Neil Harvey as the executive chairman in November 2019 to support the firm’s APAC private credit expansion.