PE funds in APAC tap private credit for acquisitions despite bank liquidity

Nearly two thirds of private equity firms are using private credit for acquisition financing in their portfolios, according to a Dechert’s Global Private Equity Outlook for 2025.

This is particularly the case in Asia-Pacific, the law firm found, with three quarters of respondents saying they use private credit for acquisition financing.

This is “perhaps surprising given the strong levels of bank liquidity available in the region for acquisitions”, the authors of the report noted. They highlighted India and Australia as countries that have seen significant private credit activity.

“The appetite for private credit remain strong across the product range currently being made available,” commented David Miles, Dechert co-head of global leveraged finance, corporate and securities, in London. “With a hopefully reducing interest rate environment approaching and an improving M&A market, it will be interesting to see how private credit deploys relative to other financing solutions.”

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Private equity managers are also tapping the private credit market for refinancings and recaps, as well as portfolio level and fund level net asset value facilities. Vista Equity Partners and Nordic Capital are among firms that have used NAV financing this year, according to the report. Nearly half, some 49 per cent, of EMEA-based private equity firms expect to increase their use of NAV facilities, compared with 30 per cent in Asia-Pacific and 33 per cent in North America.

However, Markus Bolsinger, the co-head of Dechert’s private equity practice, has warned that with interest rates coming down, private credit funds may see more competition from banks, who will try and get into the private credit market.

“If rates are coming down, we may see private credit cool a little bit,” he said. “These lenders have wedged themselves into the space where the banks used to be before they retreated, and I don’t think that’s going to change. I do think, however, you will see banks trying to get into the private credit market, as Wells Fargo did when it partnered with Centrebridge.”

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