March 30 (Bloomberg) -- Private equity and hedge funds including TPG and Och-Ziff Capital Management may pull out of Fisherman’s Wharf, the waterfront theme park in Macau with a casino built by Stanley Ho and city legislator David Chow, South China Morning Post reported today.

The funds may write off half of the value of the $340 million debt they hold as they exit the investments, the Hong Kong-based English-language newspaper said, quoting unidentified people.

Funds and Merrill Lynch & Co. bought $400 million of Fisherman’s Wharf convertible bonds in a private sale arranged by the investment bank in 2006, expecting a profit of as much as 30 percent once it went public in Hong Kong, the paper said. The theme park’s debt also included HK$534 million ($69 million) of syndicated loans, HK$369.6 million of which had been drawn down by 2007, it added.

The funds are pulling out because the public share sale and a planned doubling of the park size have failed to materialize and visitor numbers haven’t met expectations, it said. Chow, who used convertible bond sale proceeds to buy out the 45 percent stake held by Ho’s SJM Holdings Ltd., is talking to the funds to buy back their bonds to cut the project’s interest payments.

To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net

Last Updated: March 29, 2009 21:30 EDT