For Patrick O’Brien, a partner of ADM Capital Europe LLP, Kazakhstan holds investment potential into distressed companies every bit as huge as the country.
For Patrick O’Brien, a partner of ADM Capital Europe LLP, Kazakhstan holds investment potential into distressed companies every bit as huge as the country. With an equivalent landmass to that of Western Europe and a population of just 15 million people, the country has a cornucopia of natural resources ranging from hydrocarbons to vast mineral reserves. Approximately 3.5 per cent of the world’s oil is locked up there, along with 8.5 per cent of the world’s natural gas reserves. The attraction of this frontier market, where logistical pressures on companies to service natural resource production are huge, led ADM Capital to launch the ADM Kazakhstan Capital Restructuring Fund, a private equity fund, in June 2010. The firm, established in Hong Kong in 1998 by co-founders Robert Appleby and Christopher Botsford following the Asia financial crisis, specializes in distressed assets and currently advises USD1.7billion. “We’d seen the credit crisis unfolding and Kazakhstan was one of the first affected,” O’Brien told Hedgeweek. “The banks have been restructured but there’s limited equity capital and they don’t yet have much credit appetite.”
The ADM KCR Fund’s primary objective is to target and provide capital to well run Kazakhstan companies that are distressed and debt burdened due to the lack of external capital. “We acquire minority stakes in medium-sized private sector companies that are capital constrained,” said O’Brien, confirming that ADM Capital steered clear of the big mining and oil companies because they didn’t need the money. To many investors Kazakhstan is an unknown quantity, but as O’Brien points out, there are a lot of good businesses: “We look at companies that we believe are undervalued and help them to grow and compete. We’re opportunistic so we can look at any situation.” The typical time horizon for investing into these companies is three to five years. O’Brien confirmed that replacing management teams is avoided whenever possible. As to why ADM Capital launched this fund, the answer is simple: the market is still uncrowded. Competition is low. “At present there’s a huge amount of capital committed to developing its huge hydrocarbon and mineral reserves,” explained O’Brien.” Every major oil company has got its nose in the trough so there’s a good angle for investing in companies servicing the country’s natural resources.”
