BlackRock fund faces test in recovering defaulted China loan

[HONG KONG] BlackRock is trying to recoup money it is owed on a private credit loan in China, setting up a test for how Asia’s burgeoning reputation as a comparatively safer market for such deals will play out in reality.

After a unit of Chinese cold-chain logistics provider Metcold defaulted on a US$27.5 million portion of a BlackRock loan in early April, the US investment giant has been looking to enforce a personal guarantee from Henry Ha, Metcold’s founder and CEO, people familiar with the matter said, requesting anonymity discussing private matters.

The episode, while relatively small, is drawing scrutiny within Asia’s private credit circles as the first default in BlackRock’s Asia-Pacific Private Credit Opportunities Fund II. That is making it one of the most recent test cases as regional practitioners continue to pitch Asia as a sanctuary from pressures in the US$1.8 trillion global asset class, citing more conservative lending practices.

BlackRock has other collateral in the loan’s security package, according to documents seen by Bloomberg News. But the money manager has no claims on the operating companies that own the underlying physical assets, according to the people.

BlackRock declined to comment. Metcold said the points are factually incorrect and incomplete, without elaborating.

Underwriting in Asia tends to be “more disciplined” than in the US, in part out of necessity given that some parts of the region are developing markets with “not very strong legal frameworks,” Neeraj Seth, chief investment officer at hedge fund 3R Investment Management, recently said. The region has also dodged a surge in redemption requests that rocked at least a dozen funds elsewhere recently, in part as it has less exposure to software firms threatened by artificial intelligence.

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But Asia is not entirely immune to broader concerns about lending standards and deteriorating loan quality. Authorities in Australia, Japan, and South Korea are pushing for greater disclosure as they seek to get ahead of any such risks.

Meanwhile, more funds are pouring into Asia, intensifying competition for a limited pool of deals. Private credit in the region is projected to grow to US$92 billion in 2027 from US$59 billion in 2024, according to an industry report. BLOOMBERG