ADM Capital has an appetite for Asian companies struggling to pay off their creditors. It has been raising money rapidly to buy the bad debts of companies on the brink of ruin and is investing its funds as quickly as they are launched.
The firm, which describes itself as a cross between a private equity and a distressed debt fund, has just closed the US$338 million Maculus Fund II. Sixty per cent of the money is spent after only three months of investing, and the company now plans to launch the US$688 million Maculus Fund III in the second quarter.
The Asian financial crisis in the late 1990s resulted in about US$600 billion of distressed debt, spawning a whole industry of bankers generating profits from the loans. New laws in countries such as the Philippines, Thailand, Malaysia, Indonesia and India are encouraging banks to sell non-performing loans, creating a fresh pool of distressed debt for companies such as ADM.
'There are still some legacy positions out of the Asian financial crisis,' ADM director Christopher Botsford said. 'But in the main what we are seeing is a new level of non-performing loans, which we estimate to be US$700 billion to US$800 billion, and this is really a function of regulatory changes in certain countries.'
The Hong Kong firm's standard game plan is to buy debt from existing creditors, then help restructure the company that issued the debt before selling out and reaping annualised rates of return of more than 25 per cent.
Some of the firm's past investments include India Cements, the Bangkok Mass Transit System and the Philippines' Rizal Commercial Banking Corp.
Its association with the Asian Development Bank, which invested US$45 million in Maculus II, helps soften the investment firm's image when it goes knocking on the boardroom doors of troubled companies.