By Brett Cole
Balmain Group expects more distressed loan portfolios to be sold even after the commercial real estate market shows signs of recover after its biggest crash in the last two decades.
"We think every bad loan portfolio is the last but new ones still keep turning up," Balmain executive chairman Michael Holm told DataRoom.
Holm says Balmain has become the manager of six of the seven largest distressed debt sales in the last two years whose loans have a face value of $6 billion. Asset management of these portfolios is a growing business and Balmain now has 60 people managing the loans on behalf of distressed debt investors that include hedge funds and investment banks.
Many of the loans are to property developers or are secured with real estate. Between 1992 and 2008 property values soared annually. But in 2008, after the collapse of Lehman Brothers Holdings Inc, the property market soured. Commercial property values by 2011 had fallen as much as 30 per cent from their peak.
Balmain has set up three units. It has a loan servicer Amal Asset Management that has a portfolio with a face value of $9 billion. Balmain Special Situations does loan recovery work with asset managers who deal with distressed debt. Balmain also has a trust manager that manages funds for investors.
Holm's firm got its start in managing distressed loans in 2008 when it was asked by investors to take over management of City Pacific Ltd's assets, a $1 billion Gold Coast mortgage fund that had collapsed.
That and subsequent experiences dealing with distressed loan portfolios gave Balmain an understanding of value of distressed debt that proved valuable to investors, particularly those new to the Australian market.
"The more you deal with distressed assets the better you know the underlying value of individual loans," says Holm.
