High above Columbus Circle, atop the Time Warner Center, is one of the most expensive apartments in Manhattan, a sleek aerie of steel and stone, high windows and soaring views.
It is the home of David Martinez, a Mexican financier who has minted a fortune buying and selling the debt of troubled countries and companies from Argentina to Pakistan. He paid about $42 million for the 12,000-square-foot duplex in 2003, then spent even more on additions and renovations, covering the space in stone and stainless steel.
The apartment has a private art collection that is said to include a $140 million Jackson Pollock. But for all his extravagant spending, Mr. Martinez is, even to his associates, something of a mystery.
Now a legal battle with another powerful investor is drawing back a curtain on Mr. Martinez’s secretive world. While investors often have disputes that end up in court, this cross-border fight is with one of the giants in global distressed debt — Paul E. Singer, a major Republican donor. The dispute, and its eventual victor, could have implications for other companies in the world’s fastest-growing economies.
The fight is over the bankruptcy of Mexico’s largest glassmaker, Vitro, a 103-year-old company run by the Sada family, one of the wealthiest in Monterrey. Allegations abound of covert meetings, fraudulent debts and crooked courts in a bankruptcy that ended up leaving control of the company in the hands of its shareholders, while costing bondholders as much as 60 percent of their investment, according to some estimates.
That runs counter to what typically happens in an American bankruptcy, and Mr. Singer and other Vitro creditors have argued that if Vitro and Mr. Martinez prevail, other Mexican companies could have trouble raising money in the United States.
Both men are known as “vulture investors,” a term applied to those who buy up cheap debt that no one wants. The strategy has made Mr. Singer’s company, Elliott Management, one of the most successful hedge funds in the world. Mr. Singer, 68, cut his teeth wrangling payments on defaulted debt from countries like Peru and Congo, and has earned a reputation for bare-knuckled doggedness unparalleled on Wall Street. Just last week, Elliott Management persuaded a court in Ghana to seize an Argentine naval ship in a dispute over the South American country’s bonds.
Yet he may have met his match in Mr. Martinez. Over the last 20 years, the 55-year-old financier has plowed billions of dollars into troubled corners of the global economy, often aligning himself with the management of bankrupt companies.
“If you don’t know who the sucker is in a particular deal, it’s probably you,” a top investor in distressed debt said. “When David is involved, you know he isn’t the sucker.”
He and others interviewed for this article declined to be identified speaking about Mr. Martinez, citing the continuing litigation or fear of angering him. Through a spokesman, Mr. Martinez declined to comment.
Little is known about the financier, who splits his time between New York and London, where he runs an obscure investment company called Fintech Advisory Ltd. In life as in business, Mr. Martinez treads lightly. He is fond of shell companies, whether to buy artwork or to pay household expenses. Those he hires often know him only as “the client.”
But Mr. Martinez and Mr. Singer are not strangers. They have clashed before, most notably during Argentina’s debt restructuring in 2005. While Elliott is still holding out for a more lucrative settlement with the nation over its defaulted bonds, Fintech sided with Argentina in 2005, a move that some bondholders felt undermined efforts to force the country to pay what it owed.
In the case of Vitro, Elliott and allied investors contend that Mr. Martinez helped the Mexican company muscle investors out of hundreds of millions of dollars through financial sleight of hand. Mr. Singer and his counterparts, who own about $700 million worth of the company’s old debt, have called Vitro’s efforts “a testament to audacity, brazen manipulation and greed.”
Vitro says that it has done nothing illegal. The maneuvers, it says, are standard practice under Mexican law and have been used in many other bankruptcies there. Fintech noted that a United States bankruptcy court, which is handling the bankruptcy of Vitro’s United States subsidiaries, found no wrongdoing this summer. “Such McCarthy-like allegations were unsupported,” lawyers for Fintech wrote in court documents.
The conflict has its roots in 2009, when Vitro found itself mired in trouble after the financial crisis. Bad derivatives bets had dried up its cash, and it began defaulting on its debt. The company called on Mr. Martinez for help.
To get some much-needed cash, the company struck a deal with the investor: a $75 million loan in exchange for the title to several of its properties. As part of the arrangement, Mr. Martinez was given an option to return the properties to Vitro, once it emerged from bankruptcy, in exchange for a 24 percent stake in the company — effectively aligning his interests with management as it negotiated with other creditors.
In mid-2010, he went to the different banks that Vitro owed money to and bought the claims. In the process, Mr. Martinez became the biggest individual outside creditor, owning about $600 million worth of claims.
The company began taking big loans from its subsidiaries, in effect creating a fresh class of creditors outside of the hedge funds — a group under its control, with the rights to approve any bankruptcy plan. Subsidiaries went from owing the parent company about $1.2 billion to being owed $1.5 billion.
With the help of Mr. Martinez, the company outvoted many other bondholders to approve a reorganization plan.
That maneuver was upheld by a court in Monterrey, allowing Vitro to proceed with a plan that pays creditors an estimated 40 to 60 percent of what they are owed and keeps the Sada family in control.
Mr. Singer and the hedge funds have taken the fight to the United States, suing Vitro and Fintech. This summer, the hedge funds won a round, as a federal judge in Dallas declined to uphold the Mexican court’s ruling. Arguments in the appeal were heard earlier this month.
The outcome of this case, experts say, could have implications for other companies in fast-growing economies. A country that appears to be undermining protections that are typically granted to creditors in a bankruptcy might scare investors away. “This is a precedent-setting case, no matter how it turns out,” said Arturo Porzecanski, economist in residence at American University’s School of International Service. “It has highlighted apparent loopholes in the bankruptcy law of Mexico, through which Vitro ran an 18-wheel truck.”
In suing Fintech, the hedge funds encountered one obstacle early on: they couldn’t find Mr. Martinez.
When servers went to Fintech’s Park Avenue offices to deliver the summons, they could not reach him. They stood outside the Time Warner Center for weeks hoping to catch him, to no avail.
Eventually, the lawsuit found its way to the investment company in London.
Mr. Martinez was born in 1957 and grew up in Monterrey, which is home to some of Mexico’s largest industrial companies. Power there is heavily concentrated among businessmen in the so-called Group of 10, a club that includes the Sada family, which controls Vitro.
Though Mr. Martinez was not a part of that circle, he has cultivated deep connections to it. The Sadas relied on Mr. Martinez to help them maintain control of another of their companies that went bankrupt in 2004.
As a young man, Mr. Martinez was a member of Regnum Christi, an evangelical group related to the Legionaries of Christ, an influential Roman Catholic order in Mexico that includes among its benefactors the billionaire Carlos Slim. After earning an engineering degree from the Tecnológico de Monterrey, Mr. Martinez moved to Rome to study philosophy at the Pontifical Gregorian University and considered becoming a priest.
But he was drawn to Wall Street instead, and earned a third degree from Harvard Business School before taking a job at Citigroup on the emerging-markets desk in New York. There, he began his long affair with distressed debt in far-flung places. In 1985, he left the bank and eventually founded Fintech.
While it is unclear how much money the company controls, or even how many employees work there, bits and pieces have emerged about Mr. Martinez over the years. Often it relates to his art collection, which includes the works of Damien Hirst and Mark Rothko.
In his lavish redoubt overlooking the city and Central Park from the penthouse of the Time Warner Center’s South Tower, Mr. Martinez has fashioned a gallery for his art. The apartment has a two-story living room and a reflecting pool, according to public records and interviews with people familiar with the unit. A special system has been rigged to support one exceptionally heavy piece of art.
Even before the costly renovations by the architect Peter Marino, the home was among the city’s most expensive residences.
But Mr. Martinez still had spending to do. In the fall of 2006, word spread that Jackson Pollock’s “No. 5, 1948” had been sold for $140 million, a record at the time. The buyer was said to be Mr. Martinez — a rumor that lawyers for Mr. Martinez denied, sending the art world into a state of confusion as to the whereabouts of the painting.
Through a spokesman, Mr. Martinez still denies that he owns the work. But according to several people with knowledge of the collection, the painting currently hangs in his New York home.
Charles V. Bagli contributed reporting.
Article source: http://dealbook.nytimes.com/2012/10/11/in-a-clash-of-two-billionaires-a-peek-at-a-mexican-financier/?partner=rss&emc=rss
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