Two former Goldman Sachs Group Inc. traders in Hong Kong are raising money to lend to financially strapped borrowers, including the growing number of down-on-their-luck Chinese property tycoons.
(Bloomberg) — Two former Goldman Sachs Group Inc. traders in Hong Kong are raising money to lend to financially strapped borrowers, including the growing number of down-on-their-luck Chinese property tycoons.
Raymond Chan, most recently co-head of Oaktree Capital Management’s Asia distressed debt business, will be chief investment officer at Blue Mountain Bridge Capital Ltd.’s new fund. He started at the firm, created by his former Goldman colleague Jenny Sun, this year. The two plan to raise $250 million from family offices and wealthy individuals, with as much as half of that expected to close by the end of December.
They’re hoping to cash in on the many Chinese property developers whose owners are having “a hard time borrowing from traditional banks,” Chan said in an interview. “That’s where we see a lot of these Hong Kong opportunities.”
Blue Mountain Bridge is the latest private credit money manager to fill the void as banks scale back lending and delinquencies rise with elevated interest rates, making it harder for companies and their founders to refinance debt. In China, where rates have remained lower, real estate developers have faced widespread financial stress following Covid-era restrictions and government crackdowns on leverage in the property industry.
Blue Mountain Bridge’s new fund will make loans with a tenure of one to three years, aiming for returns of about 20%, said Sun, who started the firm four years ago. About half of the fund’s investment will focus on Hong Kong, with the rest in Southeast Asia, Japan and India.
“We are expecting to see a distressed and special situations cycle so big and so huge in the coming two to three years,” Chan said.
Read More: Oaktree’s Asia Distressed Debt Co-Head Chan Leaves Firm
Once China’s biggest developer, Country Garden Holdings Co. is grappling with a potential default and massive debt restructuring. Last week, the firm warned that it won’t be able to meet all of its future offshore payment obligations. China Evergrande Group Chairman Hui Ka Yan has seen his wealth dwindle and is now under police control.
Blue Mountain Bridge turns down about 80% of borrowers coming to it, said Sun. The distressed lender is focused on those with trophy assets, such as real estate, private jets or receivables that can be used as collateral for its senior secured lending. In default, the assets must be worth more than the loans for Blue Mountain Bridge to consider them.
Sun once worked as a trader at Goldman Sachs Principal Strategies, a proprietary trading unit at the bank. The Volcker Rule, introduced following the 2008 global financial crisis, barred banks with public money from taking risky bets with their own capital, ending that business. Led by Morgan Sze, Sun and more than 20 other colleagues left to help start Azentus Capital Management Ltd., one of the largest Asia hedge funds to be founded in the early 2010s.
At Oaktree, Chan led the firm’s investing activity across Asian real estate and non-performing loans. Before Oaktree, he had stints at Blackstone Inc. and multi-strategy asset manager Mount Kellett Capital Management LP. During the 2000s, he worked on distressed debt and non-performing loan deals at Goldman for the bank’s Asian Special Situations Group in Hong Kong, where he met Sun.
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