Folks, there have been quite a few discussions on distressed funds and how these funds operate / seek to gain control and profit from deals. The thing is, it appears a lot of the mechanics to gain control rely on strength of the local regulatory landscape, and it can get pretty murky in Asia. Given this, do distressed funds use different strategies or operate differently in Asia than in the US?
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Bump. Very interested in this as well
Bump
I would love to hear about this too. Always find it interesting when I see smaller distressed funds operating in multiple geos just given the skill set you need on the legal end of things...completely changes a deal.
Bump. Interested in APAC distressed/credit as well.
Doesn't seem to be a popular space. Are you in credit?
Unfortunately I'm not. I'm still on sell side.
They don't really... we have a thin bond market... in that respect. It's part, like, "Big 4" CorpFi CRG/Restructure... part sophisticated investor... part private equity... some internationals (thinking ex-IB division operating out of HK)... we have a different legislative regime here... my time was courtesy of the M&A division I was in during the GFC which saw the acquisition of loan books and the use of "pre packaged" arrangement (or what they call a "Pre-pack DOCA" in the UK). Activity at the moment is in the private space, particularly, non-senior creative stuff. Reference transactions include "Darell Lea" (private office/accounting firm) and "Channel 9" (US IB/accounting firm) debt-equity swap The current deal we did as P/E came through our credit mandate channel. We balance sheeted the acquisition of PropCo/OpCo radiology business with development upside. The short of it is, and ever since watching "Barbarians at the Gate" as a kid, I have yet to find a full-fledged shop. “SC Lowy” - “Asia” reference.
Would second the post above. Market is divided by geography/legal regime - the largest ones will be India (mostly Indian local firms working there), SEA (Indonesia esp energy), HK/China (esp real estate). HK/China is the region with the largest bond market, but the legal system in China make it tricky. HK listed securities likely still have underlying assets in China, governed by Chinese law - hard to do collateral analysis when your assets and rights are in a legal regime that doesn't have an analyzable legal system; people don't have a lot of appetite underwriting these given the lack of ability to do legal analysis.
Overall, believe the depth of legal analysis, and the accompanying depth of restructuring analysis is much shallower there. Either you are comfortable taking those risks because of who you/your funds/LPs are, or you invest more like a HY bond investor (rather than distressed investor). Some have tried to buy undervalued asset and then operate it, but most of these focused on real assets (real estate, etc.) and are more excel-driven and involve less business/strategy/operations thinking. Skillset trained in these markets are not directly transferable to US/UK - you'd have to learn that anew; though I'd argue that's the case for distressed investing in general - it's not easily transferable across regions given the amount of legal analysis involved.
Also, if I were an LP and looking to allocate to Asia distressed fund, I'd favor local players rather than Asian arms of global funds - relationship and actual experience dealing with local systems is a much more important skillset than "analysis", given the limited amount of analysis that can be performed
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