Stephane Delatte, ceo and cio of Pierfront Capital, answers SCI's questions

Q: How and when did Pierfront Capital become involved in investment?
A: Pierfront Capital was established in 2016. We have deep experience and expertise in structuring private credit investments in the Asia Pacific, with an investment team with an average of 15-20 years of relevant experience, with specific expertise across the real assets sectors. Our first fund, PCMF, which was established in 2016, has committed close to US$400m in 15 investments with four exits to-date, achieving over mid-teens gross internal rate of return.

Q: What are Pierfront’s key areas of focus at the moment?
A: We focus on Asia-Pacific real asset sectors and favour companies which are backed by strong and committed sponsors/stakeholders, with a defensive business model and resilient or contracted cashflows throughout economic cycles - the latter two being key characteristics of real asset sectors.

Q: What part of the capital structure do you typically focus on and why?
A: We are a Singapore-based fund manager that offers bespoke private credit and mezzanine financing solutions in real asset sectors globally. These are privately negotiated debt instruments. Our solutions have a high degree of flexibility and comprise debt instruments across the private credit spectrum (between traditional senior debt and equity) and in varied financing situations to meet borrowers’ unique requirements.

Q: What is Pierfront’s strategy?
A: Pierfront Capital has a differentiated private credit investment strategy focused on debt solutions to corporates or projects predominantly in real asset sectors of the Asia-Pacific region to generate attractive risk-adjusted returns. Real asset sectors include and are not limited by infrastructure, real estate, offshore marine, transportation, energy and natural resources.

Q: What differentiates you from your competitors?
A: Flexibility and range. Pierfront Capital provides bespoke solutions compared to most traditional lenders.

Pierfront Capital aims to provide debt solutions to corporates or projects predominantly in real asset sectors of the Asia-Pacific region, where such financing needs are not met by traditional commercial banks. Unlike most of our competitors, we shy away from consumer, tech and general manufacturing business, and our key sector focus is on businesses that exhibit defensive infrastructure-like features, such as hard asset collaterals and predictable cashflow that are inherently less volatile.

Q: What has the impact of a partnership with Keppel been?
A: Our long-term strategic partnership with Keppel has significant positive bearing on our real asset investment focus, given its extensive networks and in-depth operating experience in our sectors of focus. The ability to leverage Keppel’s capabilities and networks to gain access to a wider pool of deal opportunities and enhanced market intelligence, especially in times of uncertainty, puts us in good stead to continue executing private credit investments that provide attractive risk-adjusted returns to our investors.

Q: Why is there now an increase in demand for alternative lending solutions?
A: We have observed a steady demand in recent years for alternative lending solutions as traditional banks in some Asia-Pacific regions pull back from certain sectors, such as real estate or infrastructure, while companies still require a significant amount of capital to grow and develop new projects.

Q: What is your outlook on private debt as an asset class?
A: We believe private debt would be a growing asset class in Asia Pacific as sponsors get more familiar with such alternative sources of debt capital, which offer flexibility and are non-dilutive to equity.

Q: Are there future challenges that you expect will arise?
A: The Covid-19 outbreak has placed significant downside risk to the global economy and lock-downs instituted globally have disrupted usual business conduct. In the near-term, there could be a slowdown in deals as people adjust to a new working format. Conducting due diligence on borrowers may also be challenging, given inability to have face-to-face meetings with management teams

Q: What opportunities do you expect in the future?
A: We believe that in the long term, a significant financing gap in the Asia-Pacific real asset sectors will remain and there will still be a strong demand for capital due to rapid economic growth and limited funding ability. This supports the Pierfront Capital strategy of providing specialist intermediate capital to companies and projects in real asset sectors – sitting in between traditional senior debt and equity in the capital stack. While the primary focus of Pierfront Capital is on origination and execution of privately negotiated debt transactions, we may opportunistically look at private credit secondaries transactions, given current dislocations in the market.

Jasleen Mann