India: Cycle of Life and Debt

It turns out the hottest market for debt, and not even good debt, is India. Hedge funds are taking an interest because of two recent developments: 1) the establishment of bankruptcy courts under a new 2016 insolvency code and 2) the government’s new $32 billion capitalization of government lenders that will support restructurings. The $32 billion should provide confidence to distressed funds as they consider taking a piece of the $207 billion in bad loans found in the banking system. Leading funds like Bain, Varde, and Oaktree are prioritizing this opportunity.

More important than the government capital will be the integrity of the bankruptcy system itself as it is tested. Thousands of years of wisdom teach about the life-death-life Samsara cycle in matters of the spirit. In matters of Mammon, too, allowing for creative destruction makes the whole system flourish.