When three vulture funds voted down a settlement relating to bonds issued by failed bank Baring Brothers, it emerged that among their advisers was Wilbur Ross, senior managing director at Rothschild in New York.
The 61-year-old "bankruptcy king" of Wall Street has probably more experience than anyone else in the business of recycling other people's mistakes. Since joining Rothschild in 1976, Ross has been involved in eight of the 25 biggest bankruptcies of all time. He has helped investors pick over the remains of such operations as Drexel Burnham Lambert and Donald Trump's Taj Mahal casino, and has advised troubled companies such as Texaco, TWA, Continental Airlines, and Greyhound. He numbers such legendary corporate raiders as Donald Trump, Victor Kiam, Boone Pickins and Carl Icahn among his close friends.
In his long career, Ross has attracted a prestigious fan club. Trump, for one, has high praise for him. "He's fantastic," says Trump. "He's a wonderful guy and a financial genius. He's got a great sense of where the future lies."
Besides a steely nerve and formidable negotiating skills Ross possesses first-class analytical abilities. That has earnt him reputed annual returns of some 30% as an investor in distressed securities. In November last year he raised a $200 million fund from US institutional investors to invest in overseas distressed securities. In its first year of its activity the fund appreciated by a respectable 15.2%.
The Korean government has appointed Ross to manage a $450 million fund to help rehabilitate medium-size Korean companies. "The funds are an interesting migration for me," says Ross. "For all these years we've been telling people what we think they ought to do but now we're acting as principal, it's another way of keeping the score."
Wilbur Ross was born in North Bergen, New Jersey, in 1937. His father was a lawyer and his mother a schoolteacher. As a teenager he set a US record in Olympic-specification rifle-shooting. He later read English literature at Yale. "I wanted to be a writer," he recalls, "but the creative-writing course required that we produce a piece of fiction every day. It became clear to me that it wasn't what I was going to be best at."
Instead he went to Harvard Business School and gained a distinction in his MBA. In 1963 he joined what became the Wall Street firm of Wood, Struthers & Winthrop. He was given the task of liquidating the portfolio of its venture-capital affiliate. "There were 30 or so companies," Ross remembers, "some of them very successful, some horribly unsuccessful. It was my first experience in the world of sorting things out and trying to resolve what should happen what should be the capital structure, should you have bankruptcies, should you shut it down, and so on."
Next he moved to one of the US pioneers of institutional research, Faulkner, Dawkins & Sullivan Securities, where he rose to become president of its investment-banking operation. The firm was eventually sold to what became Shearson Lehman, and Ross went on to Rothschild as a partner in its venture- capital arm.
His first assignment at Rothschild involved courier company Federal Express. Rothschild had already put in $75 million but the company still wasn't profitable. "They kept underestimating the level of volume they needed to break even," Ross recalls. "But I became convinced that it wouldn't take much more for it to become very profitable. So I spent about two months arguing with the banks not to put it into bankruptcy and instead to feed it a little bit more money and get it to break even. They did, and it did, and 12 months later it went public and the rest of the story is known."
Rothschild did extremely well out of its position in Federal Express, and since then Ross has earnt his bank - and no doubt himself - millions more in fees. His best times tend to be other people's worst times. "We're a fairly contracyclical business," he acknowledges. "But even in good times there are companies that hit problems."
In the past few years Rothschild has been retained by the Italian government to restructure Banco di Napoli, and by the Mexicans to reprivatize Banpaís, the country's fifth-biggest bank. It is currently helping Daiwa Securities to get ready for the Big Bang in Japan.
Since the Asian crisis began, Ross has made some 20 trips to the region, advising troubled companies and sniffing out investment opportunities. "He's probably the hardest-working guy I've ever dealt with," says Mark Kirschner, a partner of New York law firm Jones Day Reavis & Pogue, who has worked alongside Ross on many occasions over the past 15 years. In Korea Ross has been giving advice to the Halla group on how to emerge from bankruptcy. His US-style restructuring scheme involves the first debtor-in-posession loan in Korea. "He's become Korea's restructuring guru," says Kirschner.
Ross's work and travel leaves little time for other pursuits, but he is an enthusiastic collector of 19th-century American art and plays tennis. After Ross had helped raise money for the Clinton presidential campaign, the president appointed him to the board of the US-Russia investment fund - a Tokyo G7 initiative to provide capital and restructuring advice to newly privatized companies in Russia. "I learnt enough about Russia through that to know that I didn't want to put one penny of the fund's money out there," he says.
"I love what I do," says Ross simply. "It's one of the few areas of activity where you literally can reshape a whole company. You can kind of strip out the errors that occurred before and figure out what should be the right business model and capital structure, and breathe new life into it. And that's very rewarding." Philip Eade