Singapore. Billionaire Bhupendra Kumar Modi, who made his fortune from mobile-phone services in India, plans to invest $100 million in distressed assets, including the resorts on Batam and Bintan in Riau Islands.
Modi, chairman of Singapore-based Spice Global, which has interests ranging from telecommunications to financial services, said he was in talks to buy stakes in the resorts on the islands. He wants to transform them into entertainment hubs, flying in Bollywood stars and eventually adding casinos.
â€śThereâ€™s nothing near Singapore as beautiful as these two islands, but they are distressed,â€ť he said from his 63rd-floor penthouse overlooking a casino-resort being built by Las Vegas Sands.
â€śThere are a lot of situations emerging where the actual asset is good, but it is distressed because the situation around it is not right.â€ť
Modi, who last year moved from Beverly Hills to Singapore, is aiming to fill a gap left as firms such as Blackstone Group and Och-Ziff Capital Management scaled back plans to buy distressed Asian assets.
He has set aside $100 million for investments that seek to profit from events such as spin-offs.
He plans to invest with distressed specialists, including hedge-fund firm 3 Degrees Asset Management and former traders from Lehman Brothers Holdings who are opening their own shop to take advantage of rising Asian corporate defaults.
Modi earned 21 billion rupees ($431 million) selling his stake in India-based Spice Communications to Idea Cellular last year.
He said that he had a net worth of $1.5 billion to $1.6 billion and $700 million to $800 million in cash.
Spice Global is planning a $1 billion initial public offering, Modi said in June.
He plans to invest $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 and chief financial officer after agreeing to buy as much as 20 percent of the Singapore-based Internet phone firm for about 60 million Singapore dollars ($42 million) last month.
The billionaire said he expectsed returns of more than 100 percent 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 visitor arrivals, he said.
About $1 trillion of corporate debt is stressed and distressed in Asia today, with only about 10 â€śsubstantially capitalizedâ€ť distressed investing firms chasing it, according to Robert Petty, New York-based founder of Clearwater Capital Partners, which manages a $1.7 billion fund of Asian distressed assets.
â€śThe supply-demand mismatch is interesting,â€ť he said. â€śToday is an extraordinary market opportunity if you have the depth of team to be able to do all dimensions of distressed.â€ť
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 approximately $67 billion in assets, according to Eurekahedge, a Singapore-based information provider.
Standard & Poorâ€™s expects â€śrecord levels of defaultsâ€ť in Asia as the global recession hurts the regionâ€™s export-dependent economies and leveraged industries, it said in June. Nine rated borrowers defaulted in the first five months of 2009, matching the peak of the 1998 financial crisis, S&P said.
â€śThere will be a shedload of money to be made in Asian distressed over the next 18 to 24 months,â€ť said Michel Lowy, former head of Asia-Pacific Strategic Investment Group at Deutsche Bank, who has been investing in distressed assets for 13 years.
Lowy is starting SC Lowy Financial, a Hong Kong- based distressed investment business that will focus on the region and will seek â€śall asset classes within the illiquid value investment space.â€ť 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 firmâ€™s investment and reorganization of Spice Communications. He declined to say how much the bank made because the information is private.
Hedge-fund managers investing in Asian distressed debt returned 1 percent in the first eight months of this year, according to Eurekahedge.
Asia-focused event-driven funds gained 16 percent.
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 planned to invest with Vourloumis, who made money for Lehman investing in Spice Communications. Vourloumis was not immediately available for comment.