Source : The Edge – 14 Sep 2009
Billionaire Bhupendra Kumar Modi, who made his fortune from mobile-phone services in India, is planning to invest US$100 million ($142.5 million) in distressed assets including the island resorts on Batam and Bintan neighboring Singapore.
Modi, chairman of Singapore-based Spice Global with interests from telecommunications to financial services, said he is in talks to buy stakes in all the resorts on the Indonesian islands and wants to transform them into entertainment hubs, flying in Bollywood stars and eventually adding casinos.
“There’s nothing near Singapore as beautiful as these two islands, but they are distressed,” the 60-year old said in an interview at his 63rd-floor penthouse overlooking the casino- resort being built by Las Vegas Sands Corp. “There are a lot of situations emerging where the actual asset is good, but it is distressed because the situation around it is not right.”
Modi, who last year moved from Beverly Hills to Singapore, is aiming to fill a gap left as firms such as Blackstone Group LP and Och-Ziff Capital Management Group LLC scaled back plans to buy distressed Asian assets. He has set aside US$100 million for special situation investments, which seek to profit from events such as spin-offs.
He plans to invest with distressed specialists, including hedge-fund firm 3 Degrees Asset Management Pte and former traders from Lehman Brothers Holdings Inc. who are opening their own shop to take advantage of rising Asian corporate defaults.
3 Degrees
Modi earned 21 billion rupees ($619 million) selling his stake in Noida, Uttar Pradesh-based Spice Communications to Idea Cellular last year. He said he has a net worth of US$1.5 billion to US$1.6 billion and cash of US$700 million to US$800 million.
Spice Global is planning a US$1 billion initial share sale, Modi said in June.
He plans to invest US$20 million in a private-equity fund managed by 3 Degrees to buy a stake in a resort in Bintan through the Singapore-based distressed asset manager.
Modi said he seeks management control of the companies he invests in. He became chairman of the board of MediaRing and replaced its chief executive officer and chief financial officer after agreeing to buy as much as 20% of the Singapore-based Internet telephony firm for about $60 million last month.
The billionaire said he expects returns of more than 100% if he can change the way Bintan and Batam, 45 minutes from Singapore by ferry, are being run. He will engage policy makers in Singapore and Indonesia to develop infrastructure and promote more visitor arrivals there, he said.
Supply-Demand
About US$1 trillion of corporate debt is stressed and distressed in Asia today, with only about 10 “substantially capitalised” distressed investing firms chasing it, according to Robert Petty, New York-based co-founder of Clearwater Capital Partners LLC, which manages a US$1.7 billion fund of Asian distressed assets.
“The supply-demand mismatch is interesting,” he said. “Today is an extraordinary market opportunity if you have the depth of team to be able to do all dimensions of distressed.”
Bonds are termed distressed when they yield at least 10 percentage points more than similar-maturity government notes. Near-distressed or stressed bonds have yield premiums of between 7 percentage points and 10 percentage points.
Asia-focused distressed and event-driven hedge funds and private-equity firms manage about US$67 billion in assets, according to Eurekahedge Pte, a Singapore-based data provider.
Record Defaults
Standard & Poor’s expects “record levels of defaults” in Asia as the global recession hurts the region’s export-dependent economies and leveraged industries, it said in a June 1 report. Nine rated borrowers defaulted in the first five months of the year, matching the peak of the region’s 1998 financial crisis, S&P said.
“There will be a shedload of money to be made in Asian distressed over the next 18 to 24 months,” said Michel Lowy, former head of Asia-Pacific Strategic Investment Group at Deutsche Bank AG, who has been investing in distressed assets for 13 years.
Lowy is starting SC Lowy Financial (HK) Ltd., a Hong Kong- based distressed investment business which will focus on the region, and will seek “all asset classes within the illiquid value investment space” including special situations and distressed. Investment opportunities in this area will likely peak in one to three years, he added.
Lowy said his most successful deal while at Deutsche Bank was the German firm’s investment and reorganization of Spice Communications. He declined to say how much the bank made because the information is private.
SSG Capital
Hedge-fund managers investing in Asian distressed debt returned 1% in the first eight months of 2009, according to Eurekahedge. Asia-focused event-driven funds gained 16%.
Edwin Wong, an ex-Lehman managing director, set up SSG Capital Management with former colleagues including Andreas Vourloumis to start a fund to invest in distressed assets in Asia outside Japan.
Modi said he plans to co-invest with Vourloumis, who made money for Lehman investing in Spice Communications. Vourloumis was not immediately available for comment.
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