Ex-Lehman Banker Seeks $500 Million for Asia Distressed Fund

Bloomberg – 2 March 2009

Edwin Wong, an ex-Lehman Brothers Holdings Inc. managing director, is seeking as much as $500 million for a fund to invest in distressed assets in Asia outside Japan.

Hong Kong-based SSG Capital Management is tapping “super” wealthy families in the region that would enable it to begin investment as early as April. Wong, the former head of Lehman’s Asia special situations group and the regional credit products team outside Japan, hired six former colleagues for the startup.

“We’re not diving into the market,” Wong said Feb. 27. “There are going to be cheaper assets to come out later on.” The firm is raising capital in anticipation of global investment banks and hedge funds selling more Asian assets at a discount as they reduce balance sheets and shut offices in the region. KPMG, provisional liquidator of eight insolvent Lehman units in Hong Kong, is weighing the sale of as much as $20 billion of assets to meet liabilities estimated at $22.6 billion.

Banks and brokers globally have tightened lending amid the worst financial crisis since the 1930s. The global default rate on speculative-grade debt will peak at 16.4 percent in November, worse than in the Great Depression, on the combined effect of a slowing economy and the credit crunch, Moody’s Investors Service forecast earlier this month. Lehman filed for bankruptcy protection in September amid a financial crisis that has laden global financial institutions with more than $1 trillion of writedowns and losses, according to data compiled by Bloomberg.

Distressed Investments

SSG Capital’s investments may include loans, convertible bonds, bonds, properties and even equities in Asia outside Japan, Wong said. Some of the investments may involve turning around companies and reorganizing their debt payments. “The competitive landscape is actually less now than what it was before,” said Wong, 40. “There’s only a small number of players that are still around. And there’s only a subset of that, I would say, that are still active.” SSG Capital will not focus on raising capital from U.S. and European institutions until the second quarter, Wong said.

Before his departure in mid-November, Wong worked for more than 10 years for Lehman on a team that invested in distressed assets in southeast Asia, South Korea, China and India. The Eurekahedge Asia Distressed Debt Hedge Fund Index retreated 11 percent last year, half of the decline of the Singapore-based data provider’s Eurekahedge Asian Hedge Fund Index.