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SC Lowy Plans India Push After ‘Sea Change’ With Insolvencies

2018-08-30 21:30:00.0 GMT

By Denise Wee

(Bloomberg) — SC Lowy, a banking and finance group specializing in fixed income, plans to expand its presence in India, joining distressed funds lured by the nation’s bad debt.

Foreign investor interest has been growing recently. U.S.- based investment firm Varde Partners Inc. and Indian financial services provider Aditya Birla Capital Ltd. are creating a joint venture to invest in “stressed and distressed” assets in India, the Indian firm said in a filing dated Aug. 29. Oaktree Capital

Group LLC said in April that it was eyeing India as a key market.

Indian banks are scrambling to sell assets after authorities forced dozens of large defaulters into bankruptcy courts last year. The nation overhauled its bankruptcy code in 2016 and needs foreign capital, as lenders battle the world’s worst bad-loan ratios after Italy — they have more than $210 billion of stressed debt on their balance sheets.

“We see a great opportunity there due to the changes in the insolvency process,” said Michel Lowy, chief executive officer at SC Lowy, adding that the firm plans to have an office in Mumbai before the end of the year. “It’s a sea change.”

SC Lowy is also talking to various banks and family groups about potential partnerships and hopes to make some choices about partners in the next couple of months, said Lowy. “If you want sufficient support from the regulator to establish a platform, it is always very helpful to have someone on the ground with good connections,” he said.

The firm is considering various options including setting up a so-called asset reconstruction company or buying into an existing one. It’s also considering establishing a non-banking finance company or partnering with someone to set one up, according to Lowy.

SC Lowy has already been buying loans from Indian banks. It purchased Essar Steel loans from the nation’s lenders at 50 to 70 cents on the dollar, for example, according to Lowy.

Going forward, it sees an opportunity to provide new financing for companies so that they can buy up all their debt from lenders and avoid the insolvency process, he said.

“Now that they have seen that they can lose the keys to their business they will try to preempt that,” said Lowy, referring to company founders.

While the new insolvency law is a “massive improvement,” there’s uncertainty on the outcome of companies going through the bankruptcy process, according to Lowy.

“Investing in India is not easy,” he said. “It is competitive and there is a lot of capital at the sidelines.”

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