Korea Post is looking for external managers for its senior loan strategies.
The agency plans to commit a total of 300 billion won ($242 million) to one or two managers investing in domestic senior loans. The capital will be drawn from the Postal Savings Service and the Postal Insurance Service.
Senior loan funds typically invest in securities backed by low-quality loans. Korea Post will now require the selected managers to use more than 80% of the fund to securities backed by “senior loans (including those used for refinancing) involved in M&A transactions”. The fund can invest 30% or less of the total committed capital in foreign assets and its investment in one company cannot exceed 30% of total committed capital.
Managers in the blind pool fund are required to close it within six months of being selected. There is no requirement on a minimum fund size. The life of the fund should be no more than eight years with options to extend upon agreement with limited partners. The investment period should not exceed four years after the fund’s creation.
Korea Post previously invested primarily in foreign senior loans, seeking a stable yield. It first committed 400 billion won to a senior loan fund investing in domestic senior loans last year.
Korea Post will receive proposals until June 5 with the selection process likely to take about a month. The final results are expected to be announced in July. (Reporting by Hee-yeon Han)