sc-lowy-opens-for-business-in-hong-kong

SC Lowy opens for business in Hong Kong

Ex-Deutsche bankers set up SC Lowy with a plan to focus on Asian distressed debt.

SC Lowy Financial Services said late last week that it has opened for business in Hong Kong. Founding partners Michel Lowy and Soo Cheon Lee previously led Deutsche Bank's Asian distressed products group and have over 10 years of experience investing in distressed and illiquid investments in Asia.

Their team is also made up of other Deutsche alumni, and lawyer Jamie Tadelis who joins from the hedge fund Abax Global Capital.

Distressed debt specialists are the mud-larks of the investment world. They scavenge for uncut gems amid the detritus and waste left behind when the estuarial tide ebbs -- that is, when companies struggle to meet their loan or bond repayments as their operational markets turn sour. Often, the strategy and modus operandi of distressed funds are opaque and their activities, or lack of them, veiled in a mist.

SC Lowy is no exception. In fact, it is clearer what it won't be doing. In an interview with FinanceAsia, Lowy and Lee said they won't be managing a fund and they won't be providing advisory services. Instead, the firm will use its "knowledge and experience of legal, bankruptcy and foreclosure regulation processes and precedents to ensure that all issues related to complex transactions are addressed comprehensively and [its] operational backbone to ensure transfer happens accurately and efficiently". We are not sure what that means either.

"With a proven track record in the distressed and illiquid investments market in Asia, we're confident that we can continue to deliver a dedicated level of coverage and execution unlike anything else currently available in Asia," said Lowy, who is the chief executive officer. That's good then, and they do have experience.

SC Lowy is made up of "14 experienced professionals providing clients with unparalleled access to distressed market opportunities [in Asia, Australia and Japan] through complex transaction execution capabilities", according to a press release. They all have several years of experience and tertiary educations. Lowy and Lee are both well-regarded in the industry.

"We are focused on distressed [debt] as an opportunity [wherever that may present itself]," Lowy said. In terms of assets, he added, "we look at all forms of stressed and distressed assets -- that includes, high-yield bonds, syndicated loans, real estate and private deals".

"Our in-house research, sourcing, legal and operational capabilities across the spectrum of illiquid assets allow us to deliver efficient execution even in the most complex transactions," added Lee, who is chief investment officer.

There is no external funding for the firm -- the capital comes from the management and the staff. Lowy said they have sufficient capital to ensure that the team can execute any significant transaction that it looks at.

The launch coincided with an assessment by Standard and Poor's last week of the prospects for distressed debt investment in Asia. S&P tabulated a record 12 corporate defaults up until October 1, but pointed out that most of the default activity was concentrated in the first half of the year. Five of them were the result of distressed exchanges, and "in these cases, investors agreed to fully or partially buy back outstanding debt (loans or bonds) at a substantial discount". 

"In comparison with a mature market such as the US, the distressed debt market in Asia is still in a formative stage," it argued. "Many features considered routine in an established market...are not available in Asia. The market is still relatively fragmented, and the considerable diversity of the legal regimes in the region's countries adds complexity and creates some difficulties." 

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