Cordiant Capital Inc., a Montreal-based money manager, raised $250 million to invest in emerging market loans as it seeks to replace European and American banks that have cut lending.
The fund, known as Cordiant Emerging Loan Fund IV, will offer senior secured loans to private-sector borrowers, according to an e-mailed statement. Initial investors include insurers, pension and sovereign wealth funds.
The reduction in lending by western banks has pushed up interest rates for emerging market loans, David Creighton, Cordiant’s chief executive officer, said in the statement. “Our fund gives investors low-cost access to that opportunity without the volatility inherent in a competing asset class like emerging market bonds.”
Bank lending to emerging markets fell 20 percent in 2012 to $276 billion, Cordiant said in an April 8 statement. A boom in emerging-market bonds hasn’t benefited the majority of companies in such countries because they remain dependent on bank lending, it said.
Emerging market loans pay interest margins at least 200 basis points, or 2 percentage points, higher than before 2008, Cordiant said. It expects the fund to achieve an all-in spread of 450 basis points to 650 basis points more than the London interbank offered rate.