[Private Lending Boom]②"Companies Face 'Poverty Amid Plenty'... Ample Opportunities for Private Credit"

Interview with Han Younghwan, Vice President of VIG Partners

Although the peak of high interest rates has passed and liquidity has partially recovered, not all companies are benefiting from this trend. As capital continues to concentrate in specific industries and large corporations, the phenomenon of "poverty amid plenty" is intensifying, resulting in a growing number of companies falling into liquidity blind spots. Analysts suggest that this situation is opening up new growth opportunities for private credit lending.

Han Younghwan, Vice President of VIG Partners, shared this assessment in a recent interview with The Asia Business Daily at the company's headquarters in Jung-gu, Seoul. Han leads VIG Alternative Credit, the credit division of VIG Partners. He has deepened his understanding of structured credit fund investments since his time at his previous employer, Goldman Sachs Special Situations Group (SSG).

Han explained, "Recently, limited partners (LPs) have been focusing on reducing allocations to equity and increasing the proportion of credit, so as capital commitments rise, a significant amount of dry powder (undeployed capital) is expected to enter the market." He added, "Since the market is still in its early stages, there is always a shortage of funds and high demand, but as capital supply increases, investment activity will become much more robust."

He particularly predicted that the polarization of the funding environment would drive real demand for private lending. "Companies that can satisfactorily secure funds through traditional means-such as borrowing from financial institutions or issuing corporate bonds in the capital market-do not need alternatives, but not all companies are in that position," he said. "Unlike banks, credit funds can design customized one-on-one lending structures, and, unlike corporate bonds, they do not have to deal with an unspecified number of investors, which is advantageous for companies."

Han also emphasized that the stable, medium-risk and medium-return structure unique to private lending could be attractive to LPs, as it is not a simple interest income structure like bank loans. "The target internal rate of return (IRR) for VIG Alternative Credit is around 15%," he explained. "We aim for a structure where 5-8% is secured as downside protection in the form of interest, and 7-10% is achieved through equity investments, providing upside potential." This approach ensures stable returns through interest income, while generating additional profits with capital-like instruments such as bonds with warrants or redeemable convertible preferred shares (RCPS).

Han assessed that the growth potential of the private lending market is clear. "If you look at the sources of funds on a company's balance sheet, there is always more debt than equity, which is a rational structure," he stressed. He explained that demand for loan and credit-based funding exists structurally, making market expansion a natural outcome.

Han added, "In Korea, there are still many credit investments focused on equity, like private equity, but credit investments are different from equity investments and have a low correlation, which provides portfolio diversification benefits." He further predicted, "There are many more things you can do with credit than with equity, and since this direction has already grown in advanced capital markets like the United States, the domestic market will inevitably continue to expand in the future."

Han Younghwan, Vice President of VIG Partners, is conducting an interview with The Asia Business Daily at the VIG Partners headquarters in Jung-gu, Seoul on the 6th.