Bond Veteran Lowy Sees Troubles Ahead for Asian Debt

  • Weakening commodity prices to lead to more stressed debt: Lowy
  • Noble and RCom among SC Lowy’s most actively traded debt

Michel Lowy.

Source: Institutional Investor

Distressed debt investor Michel Lowy is getting ready for more pressure on debt sold by Asia-Pacific companies as commodity prices decline and central banks move to less supportive monetary policies.

That combination will probably require Asian companies that have made missteps to restructure, according to Lowy, 46, chief executive officer and co-founder of SC Lowy Financial HK Ltd.

“There is a lot of leverage in the system in large markets like India and China,” said Lowy, who was with Deutsche Bank AG for a decade before co-founding his own company. “Corporates that are making the wrong decisions will restructure, which is healthy.”

Distressed bonds and loans of Noble Group Ltd. and debt of India’s Reliance Communications Ltd were among the most actively traded by SC Lowy in the first half. SC Lowy has about a 30 percent portion of loan trading in the Asia-pacific region, and wants to boost its market share of Asian high-yield bond trading to about 20 percent, he said.

Once Asia’s largest commodity trader, Noble’s dollar bonds fell below 40 cents on the dollar from over 95 cents after posting an unexpected quarterly loss last month.

Commodity prices have declined 8.6 percent this year after recovering 11 percent in 2016, according to the Bloomberg Commodity Index. They fell 25 percent and 17 percent respectively in the two previous years.

SC Lowy was founded by Lowy and Soo Cheon Lee in 2009 after both worked on Deutsche’s special situations desk. Lowy, who has been in Asia since 1997, expects the volume of the firm’s Asia and London loans and bond trading to reach $15 billion this year, up from $13 billion in 2016.

About 60 percent to 70 percent of high-yield bond trading at SC Lowy is now China-related, with some China loans trading too, according to Lowy.

“When I moved to Asia, the business was all about Japan, Korea, Thailand, and Indonesia,” he said. “Now China is a very big piece of the puzzle.”

(Corrects time reference in the last paragraph.)
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