Financial Times

ADB, Hong Kong Group plan 3rd fund to help troubled Asian firms
The Asian Development Bank (ADB) and ADM Capital have announced the closing of a US$338 million Limited Partnership fund, the ADM Maculus Fund II L.P., that promotes the recovery of financially distressed but potentially viable companies, in Asia. This is the second Fund in the ADM Maculus series taking the total to US$476 million.

The ADB said in a statement a third fund of US$688 million is planned for launch in the second quarter of 2006. ADB is a co-sponsor in the ADM Maculus Fund Series and has committed a total of US$45 million to the series. The ADM Maculus Funds focus primarily on Southeast Asian markets which are believed to harbour the equivalent of more than US$800 billion in non-performing loans.

Typically the ADM Maculus Funds will buy out existing creditors to initiate financial or corporate restructuring of companies that are at risk of bankruptcy due to excessive and unsustainable debt levels or financial mismanagement. The track record to date has been encouraging; In March last year ADM Capital completed one of the largest recent Indian corporate restructurings for India Cements Limited. Attempts to resolve India Cements' debt problems with its large creditor group had proved unsuccessful, even with the help of the CDR (or Corporate Debt Restructuring system), which is India's mechanism for workout negotiations.

The statement said ADM Capital worked closely with India Cements to buy out US$180 million principal amount of its debt that was held outside the CDR and took a debt and equity warrant investment position in the company. This takeout enabled the resolution of the debt problems with the existing creditor group. With a reduced debt burden and a rapid turnaround in the cement market in south India, India Cements posted a profit in the second quarter and was able to issue global depositary shares, listed on the Luxembourg Stock Exchange, in October 2005, further de-leveraging the balance sheet.

ADM Capital has bought several non-performing loans both as single credits and in portfolios. It has exited one complete portfolio based on a reassessment of risk and exited a single investment of a company in the petrochemical business based in Guangdong Province. In Thailand, ADM Capital has taken significant stakes in both the debt and the equity of the Bangkok Mass Transit System pcl. (BTSC) which operates the Bangkok Skytrain.

ADM Capital also purchased a 50% share in a portfolio of defaulted residential mortgages on 9000 properties in Thailand. A flexible approach to resolutions has improved the cash flow of the investment and allowed certain mortgage holders to release themselves from the legacy of negative equity in their homes. In Indonesia, ADM Capital has negotiated to buy US$230 million of defaulted debt in two specialist plastics companies, based in Merak, Indonesia, and has signed an agreement to convert this debt into a 93% share in the combined equity.

ADM Capital is in the process of completing a corporate restructuring and is being approached by interested strategic partners. In the Philippines, ADM Capital has bid and won 4 separate auctions for assets being sold by the banks including PHP2 billion of non-performing loans from the Philippines fifth largest commercial bank, Rizal Commercial Banking Corporation (RCBC).

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