In fight for a Mexican company, a peek into a tycoon's world

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, Martinez is, even to his associates, something of a mystery.

 

Now a legal battle with another powerful investor is drawing back a curtain on 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 per cent of their investment, according to some estimates.

That runs counter to what typically happens in an American bankruptcy, and Singer and other Vitro creditors have argued that if Vitro and 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 Singer’s company, Elliott Management, one of the most successful hedge funds in the world. 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 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 Martinez, citing the continuing litigation or fear of angering him. Through a spokesman, 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, 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 Martinez and 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 Martinez helped the Mexican company muscle investors out of hundreds of millions of dollars through financial sleight of hand. 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.

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© 2012 The New York Times News Service