BlackRock Inc.’s Asian private credit fund encountered its first default event with a borrower in its investment portfolio, Metcold Holdings Ltd., a food cold chain infrastructure service provider based in Shanghai, China, failing to repay its loan.
The default by Metcold can be attributed to the economic downturn in China and shrinking consumer demand. On the other hand, there are signs indicating a serious crisis in the global private credit market.
According to Bloomberg, sources revealed that Metcold defaulted on April 1 by failing to repay $27.5 million in loan principal, leading to the default on the loan. They added that unpaid interest amounts to about $12 million. In total, the principal and interest amount to nearly $40 million.
Metcold’s default occurred despite its previous loan of $52.5 million, which was partially repaid in 2024. The company’s headquarters is in Hong Kong, while its business center is in Shanghai, led by founder and CEO Henry Ha, experienced in real estate funds, infrastructure investments, and leverage financing.
The default by Metcold can be attributed to the downward trend in the Chinese economy, resulting in subdued demand and a weakening economy, affecting the previously booming cold chain infrastructure.
The cold chain logistics industry is a capital-intensive sector that revolves around tangible assets, akin to real estate investments. Previously, the logic behind investing in the cold chain industry was driven by consumer upgrades leading to the development of fresh e-commerce, sparking demand for cold chain services. However, with e-commerce growth slowing down, companies like Alibaba reported minimal growth in their e-commerce business.
Metcold primarily generates income from rents, operational service fees, and asset appreciation related to its cold chain operations. However, with the downturn in the Chinese real estate market and shrinking consumer spending, the company faced challenges in asset appreciation and revenue generation, exacerbated by tightening financing conditions and increasing costs.
Furthermore, Chinese asset valuations have significantly declined in recent years, making it difficult to liquidate assets. Global top private equity firms have struggled to divest their investments in China for cash.
Established in 2015, Metcold positioned itself as a leading cold chain infrastructure service provider in China, receiving investments from Macquarie Infrastructure and Real Assets (MIRA) in 2018. The company operates a range of cold storage and logistics facilities in key cities in China.
Metcold’s vision is to provide modern, hygienic, efficient, and reliable food cold chain facilities and services to Chinese consumers. Its business spans investments in high-standard cold storage, temperature-controlled sorting and processing centers, automated cold storage, central kitchens, and fruit ripening facilities.
The company’s CEO, Henry Ha, formerly associated with Deutsche Bank’s asset management division and China Investment Limited (China’s sovereign wealth fund), envisioned Metcold as a platform supported by institutional capital in the cold chain industry.
Metcold’s mission is to offer cutting-edge cold chain infrastructure that aligns with the burgeoning consumer demands in the fast-growing Chinese market.