Bayside Private Equity has received lukewarm response in its fundraising efforts to acquire Hyundai Heavy Industries Power Systems – raising doubts over its ability to complete the acquisition.

Bayside recently started raising funds from domestic mutual aid associations for its project fund, industry sources said on October 7. The fund is being formed to take over Hyundai Heavy Industries Power Systems owned by Korea Shipbuilding & Offshore Engineering, with a target fund size of approximately 200 billion won ($174 million).

Industry watchers said the Bayside is seeking multiple investors simultaneously. This is an unusual move as PE firms normally secure anchor investors first and then start marketing to investors, including mutual aids associations. This is probably because Bayside’s negotiations with mutual aids associations, which would normally act as anchor investors, didn’t go smoothly.

Some limited partners are concerned about getting involved in the absence of an anchor investor. Market insiders widely expect the participation of an anchor investor is key to the success of Bayside’s fundraising.

Bayside plans to fund about half of its acquisition cost through acquisition financing involving senior loans. It had been in talks with several domestic securities firms for acquisition financing, but couldn’t reach an agreement.

It is understood that even arrangers had concerns about the deal. The target company depends on affiliates of Hyundai Heavy Industries for most of its revenue, heightening uncertainties after the acquisition. Also, the use of LNG-powered vessels is increasing amid a rising number of countries that are prohibiting port entry to ships equipped with scrubbers.

Securing an anchor investors and an arranger to provide acquisition finance is crucial to the possible completion of Bayside’s takeover of Hyundai Heavy Industries Power Systems, industry watchers said.

“The fact that (Bayside) hasn’t secured a letter of commitment yet weakens the deal certainty a lot,” said an industry source. “At this moment, it is inevitable for us to have a negative perspective whether the deal will be struck.” (Reporting by Ik-hwan Choi)