US investment fund KKR is considering entering the private lending market in Japan to provide an alternative to bank loans.
“It will be a mid- to long-term initiative,” Hiro Hirano, head of KKR Japan, said in an interview. “I think it is very important in Japan that we do it ourselves.”
The $1.7 trillion (¥267 trillion) private credit industry has grown in the U.S. and Europe by focusing on high-credit-risk companies and private equity funds that need help financing acquisitions.
In Japan, most direct loans are made abroad and the domestic lending market is dominated by large banks.
In addition to private credit, Japan is the destination for approximately 40% of KKR’s investments in Asia.
The company sees Japanese companies increasingly willing to sell non-core assets that can perform better as individual entities.
These so-called carve-outs often provide returns that are higher than with other investments.
“An overwhelming number of Japanese companies and businesses have the potential to grow but are not performing well enough,” he said.
The company also plans to expand its offering to institutional investors and high-net-worth individuals in Japan.
KKR is in talks with domestic securities firms to offer products to individual investors.
It already has an asset management joint venture with SBI Holdings.
For institutional investors, KKR will provide broader access to its funds.
In addition, the 2022 restructuring of Marelli Holdings, a Japanese auto parts supplier owned by KKR, cost the company the $2 billion it had invested in the company.
Banks that had lent to Marelli lost a total of ¥450 billion.
KKR invested another $650 million to finance Marelli’s restructuring and the company is now profitable, Hirano said.
