Blackstone, AIG Launch Asian Advisory Group –

The Blackstone Group and AIA Capital Corp., the Asian investment and advisory branch of American International Group (AIG), this month formed a partnership that will focus on advising companies throughout Asia on various financial situations.

The two firms have an exclusive collaboration agreement in five countries-Indonesia, Thailand, Malaysia, Singapore and Hong Kong-and will operate on a non-exclusive basis in other Asian markets.

“There are very few pure restructuring assignments in Asia,” said Tim Coleman, a senior managing director at New York-based Blackstone. “Almost every large enterprise that needs our restructuring advice ultimately needs to raise capital.” Mr. Coleman declined to comment on whether Blackstone or AIG would be providing capital directly.

Gearing Up for Asia Activity

The partnership will focus particularly on advisory assignments that entail restructurings, mergers and acquisitions and related situations that might call for a capital infusion. As opposed to domestic restructuring assignments, Asian companies currently are so cash-starved that the first step is to bring in new capital, followed by the evaluation of business practices that might then lead to a merger or sale of some assets.

New capital likely will come from the private market for the time being, and most investors will desire majority, or at least control, stakes for their participation, said a source familiar with the market. Despite the anticipated desire on the part of investors to control these companies, the source said the time is ripe for venture-type investors.

“The investors could be strategic partners or opportunity funds, and some private investors have been looking around,” the source said.

To be sure, the Asian market remains a difficult shell to crack for private investors. The need for connections to open doors in the region certainly continues to pervade the market. Blackstone’s Mr. Coleman said AIG and AIA have long-term relationships throughout Asia. In fact, receptivity of companies in need of the services of this type of partnership will depend heavily upon the Westernization of the respective management teams. “They are now learning how to use advisers after having done underwritings,” the source said.

Blackstone and AIA were forced to limit the exclusive portion of the new partnership to those five countries by ongoing activities in other areas of the region.

Blackstone has entered the relationship with only its advisory services, but the private equity group at the New York firm has begun more actively pursuing investment opportunities in the region. The firm can allocate as much as 20% of its current $3.8 billion fund in all international markets.

Mr. Coleman would not comment on the likelihood of a forthcoming Asian fund. If Blackstone does launch an Asia fund, it would be following in the path of groups such as Chase Capital Partners, The Carlyle Group, Newbridge Asia and H&Q Asia Pacific, all of which currently are marketing Asia-focused funds (see story, p. 1).