Oaktree Capital Group LLC sees opportunities to invest “more aggressively” in Chinese and Indian distressed debt as the legal and regulatory systems of the countries develop, Chief Executive Jay Wintrob said on Monday.
“These are countries where the legal system, the bankruptcy code, the sanctimony of the rule of law are still under development, in a very positive way, especially in China,” Wintrob said at a news conference.
“As those institutions develop and the predictability of the outcomes, their willingness to uphold the priority of creditors vis-à-vis one another, you will see more opportunities to invest, to invest more aggressively.”
The company has invested in Chinese non-performing loans (NPLs), Japanese equities as well as Australian private equity and distressed debt, and was looking to make inroads in India.
The Asia-Pacific has been a bigger market for Oaktree to raise money from than for the Los Angeles-based firm to invest in, but that could change as more opportunities emerge.
Oaktree, the world’s biggest distressed-debt investor, has invested in four Chinese non-performing loan pools and has a partnership in India, Wintrob said.
The two countries have seen a surge in bad debt and non-performing loans, but those assets are still for the most part with banks, which may be prodded to clean their balance sheets and create buying opportunities for Oaktree.
“There’s certainly plenty of supply (in India and China), but the vast majority of supply is not available for sale. So it’s really a matter of government policy, regulator policy, rating agency policy” to prod banks into offloading NPLs, Wintrob said.
Turning to South Korea, Wintrob said its markets have taken growing tensions between North Korea and the United States in stride, but added they could quickly reverse if conditions worsen.
“How is it that there are so many obvious things to potentially be concerned about in Korea and the equity markets, the credit markets, interest rate spreads, default rates, transaction volumes show no sign of abating whatsoever,” he added.
“It doesn’t seem like people are too worried about it, which tells me that if there’s a problem you’ll have a big reaction, big reaction because no one is prepared for it.”