When local-currency pricing quietly rewrites USD entry economics before capital is deployed.
Sector: Private Credit – Local-Currency Commitments (Repeat Origination)
Asset Class: Sponsor-Backed & Direct Lending (IDR/VND/THB/PHP/AUD Pricing)
Situation Type: Sponsor-backed & direct lending priced in IDR / VND / THB / PHP / AUD, reported in USD
Primary Issue: Commitment-stage FX drift – underwriting becomes stale before closing, eroding USD entry economics without any change in credit quality
The Situation
In local-currency private credit, pricing often becomes binding well before capital is deployed.
A deal can be “won” on a USD IRR and entry multiple that assumes a specific FX rate – then sit in limbo while documentation, approvals, and closing conditions run their course.
During that window, FX exposure is economically real, but operationally unowned. By the time funding occurs, the portfolio may still be buying the same asset – but at a different USD price.
Why This Scenario is Common
This issue keeps recurring because the process is structurally misaligned:
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IC approval is typically anchored to spot FX at commitment
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Treasury engagement is deferred until deal certainty is high
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Hedging is treated as “execution” rather than underwriting ownership
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Close timelines routinely extend weeks or months
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Repeat origination creates compounding leakage across cycles
It’s not an FX skill problem. It’s an ownership and sequencing problem.
Why It Matters
The damage is rarely obvious in a single deal.
But repeated across origination cycles, commitment-stage drift becomes systematic performance drag:
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USD entry costs shift before deployment
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Realised IRRs compress quietly
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Bid competitiveness weakens (or pricing discipline breaks)
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IC decisions are retrospectively rationalised rather than kept true
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Leakage gets mislabelled as “market noise” instead of process failure
How This Is Typically Addressed
Not by “hedging earlier”.
The practical fix is to define when FX becomes owned, governed, and decision-relevant – and to embed that in the deal process.
That typically includes:
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Explicitly defining the commitment point where FX becomes economically live
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Embedding FX sensitivity into IC papers and decision thresholds
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Designing conditional hedge responses that scale with deal certainty
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Assigning ownership across the commitment-to-close window
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Sequencing actions so FX doesn’t re-enter the process as a surprise at closing
Structure first. Instruments second.
Primary Engagement Route
Structuring-as-a-Service™ – Deal-stage FX ownership, decision rights, and execution sequencing across the commitment-to-close window.
Read the IC Brief → (2-page decision summary)
Full structural narrative shared selectively on request.
Illustrative scenario for discussion purposes only. Not a transaction summary or client-specific case study.