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good evening my name is charlie coker and i'm the executive director of asia society of southern california i'd like to invite you to this evening's program uh money games the inside story of how american dealmaker saved korea's iconic bank with owaigen sean this evening we're very happy to have not only dr sean joining us but also jonathan carp who will be moderating um the discussion today um without further ado i'd like to introduce jonathan carp who will um set the set a few ground rules for asking questions and some various other issues for the evening thank you so much hi uh good evening everyone and welcome whether you're joining us in the evening or night time in the u.s or in the morning as dr weijinshan is from hong kong or elsewhere in asia we're very happy to have you with us um i want this to be as interactive as possible we're going to be conversing and we want you to be part of the conversation so if you would like to submit a question um please go to the bottom of your screen and click on the q a uh icon and type it in it will come to us and we will incorporate as many questions as possible throughout the conversation um rather than waiting till the end i mean that's that's our promise that's our aspiration um i'm very pleased to introduce uh dr sean and we're so happy to have him back with us in asian society southern california um about a little over a year ago we had him for his first book out of the gobi my story of china and america and that was really about it was a memoir of his life growing up in the cultural revolution and making it to um america to work in american finance and now the book money games that we're going to talk about tonight is the sequel in a sense because that's sean moving out of academia where he was teaching at wharton and then he um decided he wanted to be in the action he moved to jp morgan and then to this private equity firm that was uh that was starting out called new bridge capital and that really got him into the heart of deal making and he came out to asia went out to asia um and so the book money games is it's a fascinating story that is told in such great detail with such energy of uh these negotiations in the back and forth and it's not just a story about a deal it's a story about a very important moment in time the asian financial crisis and the efforts to uh reform economies in this case korea this was not just the sale of a bank this was a very important milestone in korea's renewal from the crisis and it's opening to foreign investors and um you know what's interesting is that this saga of korea first bank has been chronicled in a number of other accounts that's how important it was including one by uh one of the chief negotiators who was sitting on the other side of the table from sean but this is the first really comprehensive account of it from an insider who was really the architect of the deal and there from the beginning of the idea through new bridge capital successful exit and very profitable exit from the deal so now today uh sean is the group chairman and ceo of pag which is one of the largest private equity groups investment private equity it's alternative investment real estate and others in asia and uh sean welcome i i i'd like to set the scene for you to start it was about a year after the imf had given korea 58 billion dollars to get out of its crisis in the financial crisis and part of that was to sell off state assets in this case banks and reform the banking sector and so one day you're i think it was in new york maybe san francisco and you get reports that uh korea wants to sell either well both korea first bank and soul bank and you quote what you said out loud according to your book is who would want to buy a failed bank in a failed economy in the middle of the worst economic crisis the country has ever experienced so who did and why thank you very much thomas and thank you for having me here this great pleasure yes it was uh extraordinary time in the middle of asian financial crisis of 97 98 if i uh can compare with experiences in the united states it was like buying demon brothers in 2008 right the bank failed just to put that particular event into context asian financial crisis came actually started on july 2nd of that year with the collapse of the thai currency but by the end of the year korean won dropped 65.9 percent so two-thirds of its value was lost overnight the stock market fell 49 earlier in october october 23rd of that year hanson index the stock market index in hong kong dropped 16 in one day 16 in one day so worse than any day in 2008 during the global financial crisis by the end of the year in korea the foreign change reserves with which the korean government would use to pay its foreign debt dropped to 8.9 billion dollars my firm pag today manages 40 billion dollars and a big country the 20th largest country in the world had only 8.9 billion dollars in foreign exchange reserves by the end of 1998 in 1997 i'm sorry so the country was going to go into default in about a week or two and that was when imf the world bank came in and provided the largest rescue package to any country to date in history 58 billion dollars one condition of that package was for the country to sell two banks not any assets but just two banks one of which used to be the largest in the country the two banks were career first bank and sold bank the reason that the multilateral agencies required the government of korea to sell those banks was because many many banks about 150 banks failed in korea prior to that time and obviously there was a serious problem with the banking system which stopped functioning and one major problem was the lack of credit culture you know loans were made on the basis of relationship or government policy without regard to the credit worthiness of the border and that's how many banks with bad loan ratio as high as 30 or even 50 failed so the world bank and imf thought the only way to bring credit culture into this country was through foreign investment that's why the condition for the rescue package of 58 billion dollars was to bring in foreign capital foreign investors to buy these two banks that was the background of the story and why when you thought out loud that it would be insane to buy a failing bank in a failing economy in an economic crisis how did you get from there to the following 15-month saga well i always thought that to invest in a bank is too bad on the macro economy when the macro economy booms banks do very well when the macro economy go down banks are usually the first to suffer again think about 2008 2009 so many american banks failed so many european banks failed so i thought it was crazy to buy a bank which already failed nationalized by the government in the middle of the worst economic and financial crisis that korea ever experienced since after the korean war and of course i was unexperienced inexperienced in private equity so my partner dan carroll who was sitting in the same car as i was reading this teaser sent over by morgan stanley which represented the korean government and said to me well maybe we should send this to david bonderman the founder and chairman of tbg with which new bridge was affiliated and uh he said maybe vonderman would have some idea in this regard the next day bonderman replied by email very characteristic of him he didn't know how to use uh sorry by fax he didn't know how to use email at the time so he sent the facts back he said the history of life shows that if the deal is structured right this is as good as any time to buy a bank and you can make a lot of money out of it and so that's how we started the journey of trying to buy this major bank in korea in the middle of a financial crisis and also for background david bonderman had done this successfully in the u.s savings and loan crisis right this was something he knew firsthand that could be done yes is that right well before funding tpg bonderman was the cio chief investment officer for bass brothers robert bass i think and there or shortly after that he engineered the acquisition of american savings bank in the middle of the savings and loan crisis in the united states in late 1980s and he made a lot of money out of that particular deal but pioneered the structure of good bank and bad bank to solve the problems of a failed bank so we basically use that model with some adaptation for the asian environment to acquire the bank so you had it you had a good mentor here was the brain behind the transaction um so that's why you got into the deal why did you write the book what were what were you hoping what are you hoping to achieve in telling the story in the incredible detail that you go into well first of all it's very interesting story it's very complicated story it's like no other story that has ever been told you know just think about the parties involved in this particular transaction there are multilateral agencies imf in the world bank two governments were involved one tangentially one very deeply involved korea government of course and the u.s government because new bridge capital where i was a ponder was an american firm and then of course taxpayers paid close relations attention to this particular transaction since billions of dollars of taxpayers money went into saving these two banks the public looked at this transaction very closely and then there are many many advisors there are investors bank employees so it was very complex transaction and i like to say or i joked at that time that this particular transaction became a national pastime for korea because it was reported in newspaper every day a wall street journal your paper and your colleague reported it didn't me at that time and all the major international newspapers but i think more importantly is the story about private equity private equity is much talked about but very little understood it's regarded as a mystery today there are more private equity controlled companies in the united states than all the public companies combined and that's how influential and powerful private equity is so many people talk about private equity and private equity of course plays a very important role in almost every major economy especially in the crisis like today locked down induced crisis today but there's very little understanding of it and there are some books about private equity but typically written by reporters and typically about the deal making part of the deal you know for example the book about rjr nabisco's labisco's transaction by kkr there's a book by the name of barbarians a gate made into hbo movie very well known but that book was written only after one year of the deal making and eventually the investors invested three billion dollars in that transaction if i remember correctly borrowed the 25 billion dollars so it was you know almost a 30 billion dollar transaction after 15 years investors lost money probably to a tune of 750 million dollars but nobody talks about it because nobody wrote about what happened after the deal was put together and similar stories were told by reporters and this is the first time an insider is telling the story from the beginning to the end from entry to exit the full investment cycle so i thought that for those who are interested in how private equity works this will be a very interesting story for them to learn it is and i and and i want to talk about the some of the bigger issues of private equity as we go along um the story as you point out is a very interesting story it's got colorful characters it will cause whiplash by the number of changes and i i don't know how many iterations of the proposal you guys went through but i lost count like after 20. i don't know i don't um remember numerous you know it seemed like suddenly these these new approaches were coming out of nowhere and they were the solution and um in any case but yeah let's you know it's very rich in anecdotes and and color and so yeah i know you don't as you told me before you don't want to give away the whole story um before people read the book but i would you know like you to talk about some of the sort of the highlights of that experience for you um either in terms of the the deal making or the cultural aspects of negotiating this because as you point out private equity is still a little understood it was even less understood then and it was totally new to the korean government um i mean you weren't a traditional bank after all so what what what are your fondest or sourest memories of of the process the negotiation process was very grooting and i think one reason why it took so long and why the negotiation almost broke down numerous times was because there was very little understanding mutual understanding between the two parties the government side the officials all of whom were very dedicated very hard working didn't know much about private equity homeless at all they have never sold a nationalized bank in the past and they were fighting for the best interest of what they considered to be the best interest of their country and their people their taxpayers and therefore they were very very cautious they were afraid of giving the store away when we represented our limited partners our investors who we call limited partners in fact many people including the people in this audience have a stake in private equity you know our limited partners included for example the state pension funds in california and elsewhere right so we represented many pensioners and many small investors whether or not they know it or not so we wanted to make sure that if we bought a bank in the middle of economic crisis we would not lose money we will make money for our lps our investors so there was very little trust between the two sides we were afraid of losing money they were afraid that we would make too much money so how to bridge that gap was very important and eventually as i described in the book i came up with the formula how to build that trust and we spent more time trying to communicate with each other trying to build that trust and that was the most memorable part eventually we put the deal together which i consider to be good for both parties it's very rare many people think of negotiations as a zero-sum game i don't think so eventually we created a structure that is beneficial from the government side as well as for our side for example i'll just pick one admin bit to tell you in the middle of the discussion we're going to buy 51 percent of the bank and the government was going to invest almost the same amount of money to own 49 of this bank after we recapitalized the bank and then david bonderman called me and said son let's offer five percent warrants to the other side the other side didn't even ask for it warrants are options for the other side to buy more shares at the cost of our investments so basically five percent more upside to the government side and why did they do that and i hesitated for a moment and i accepted his suggestion and offered to the korean government side because we wanted to show goodwill we wanted to show that we want we want you to get better upside than we do and that went a long way to build the bridge of trust between the two sides right and i i think i also recall when you took another sort of unsolicited step in sort of showing the government your sort of profit model like what you how you guys were going to calculate the returns before you got to that stage in the in the negotiations where you really had to um i mean you you in your telling you went you bent over backwards to build trust often to just see it turn on you and have things change at the last minute after the government had already like let reporters know that the deal was imminent um i mean that's what i found remarkable there must have been 10 or 15 separate cases when reporters have been alerted by the government that it's going to happen tomorrow and then they the government will come back to you and change the terms including at one point saying you know we want control of the bank even though the imf is quite clear i mean how did you process this how did you keep your cool well i thought that uh the only way to build trust is to be somewhat transparent of course in the negotiation you couldn't be 100 transparent but i thought that people would suspect that uh you know there were some things that you knew that they didn't and therefore it was very difficult to make progress so it's almost heard of for anyone in the negotiation process to reveal his hands in the middle of a negotiation that's exactly what we did i thought if we were so concerned about us making too much money we might as well as well show them our financial model because we have to build a model to figure out you know what would happen to this bank in our hands and we have to make some assumptions we have to project you know how the assets will grow over time how the capital will be deployed how many people we would hire or retain on the payroll and i thought if i showed this model to them then that would have been their fear that we were making too much money out of this deal and that's what we did they were very surprised that we were willing to do it because it's like revealing your battle plan to the other side in the middle of a war right but that was a good step to build the trust between the two parties now um you had you in in your book there's some very interesting photos and as well as some cartoons that you included at the time to sort of let the reader know what the atmosphere was like um and i think if you want to talk about them i think we can show them to the to the viewers if you want to talk through them because you thought that they were emblematic of the atmosphere yes indeed because negotiation was on the verge of breaking down several times and of course this deal received so much attention from the public and the media so it was being reported incessantly at the time and there were some very interesting cartoons which reflected the uh atmosphere at that time if if we can put up yeah one of them is this one by mail business weekly or something so this girl sitting in the middle you know with uh hot spots on her face and she's using a fan a korean style fan and the logo on the fan is korea first bank it's the bank that we're talking about and she's crying right in the middle of the village on the left-hand side and this woman with the baby on her back says i heard that they spent three billion dollars to give her cosmetic surgery and the other woman says well i heard they want to spend another three treating one you know about 3 billion us dollars to improve her face and then on the right hand side and that western look gentlemen represents new bridge capital that is my firm and the bubble over his head wrists she doesn't look anything like her photos right so the korean press basically says you know this bank is so broken even after the government injected billions of dollars or trillions of korean won into it uh it just didn't look good enough for this foreign investor to be interested and that was during the time when the negotiation was reported of having broken down even though we never disengaged so this is one of them and there's another one i think quite interesting i think it's going to come up in just a second um [Music] yes this one put it out right so again you know there was a report that negotiation broke down and that bridge that drop bridge represents newbury's capital that's my firm and the western-looking gentleman up there was shouting and then down on the pier the gentleman was in fact the president of korea south korea kim beijing and he's holding a bag of blood you know transfusing into korea first bank this wobbly girl and then the man on the bridge says i come here for a wedding not a funeral indicating that newberry was putting away so you know this cartoons and there are many of them and i included a couple of them in my book really give you some idea how much attention was paid to this transaction and what the feeling the mood was in korea at that time now in uh in 1998 when korea's foreign reserves dropped to a level that it could last only about a week or two before korea would default on foreign debt the government encouraged korean citizens to sell their jewelry their gold in order to replenish the foreign change reserves so it was a very painful time in the history of korea and korea was never open to foreign control of a bank and now they felt that this condition was imposed to them unto them by international organizations such as imf and the world bank so it was a painful decision that they made to bring in foreign capital and foreign control of bank and they didn't know what it would bring to them whether it was a good thing or bad thing and i think most people doubt it it was a good thing you know when you went to korea in 1998 it was very interesting it was in the middle of crisis imf came in with the largest rescue package of 58 billion dollars and saved korean economy and yet every elevator that you go into there are two buttons open and close and open is supposed to be good close is supposed to be bad all the close buttons are labeled imf i mean it's just bad so whenever you go into animator you push on imf and that was very reflective of the mood at that time and that's why this this bank deal was so important important and excruciating um because you know you're dealing with officials from different ministries and different task forces and they have different pressures but it was you know at the time then with all the setbacks back and forth months you know day to day sometimes um you know your partners at new bridge capital were also having doubts i mean there was a lot of consternation and a lot of questioning about moving forward um but and i i kept asking myself as i was reading it why why did you keep persevering what was the what was what was the mission that you were on and also did your family at some point say look you know um dad this is great you're doing this but because you were commuting from hong kong but please don't go back this seems to be a a lost cause were you getting pressure from people in your family or people you knew in hong kong who were just like this is a fool's errand yes indeed i still feel very guilty to my children and my wife that i was more often than not during that period of time the negotiation lasted months and months on end you know there's a thinking within the investment opportunity investment community that you have to be able to cut losses if something doesn't happen you have to be able to walk away you can't just get stuck and my some of my partners kept reminding me of that but i just thought that there was a threat of hope at all you know we should just persist in my life as i described in my first book out of the govi i persevered when i was a hard liver in the govi desert of china and in comparison this was nothing at least we had enough to eat uh camped out in the hotel in in korea and i thought that it was a very significant deal if we could do the deal he would do good to the country bringing banking restructuring to the country bringing credit culture to the country bringing international best practices in banking to the country it would be very good for our investors as well it would be a milestone transaction at that time so we just persisted and incidentally your colleague at the wall street journal i know at that time you were in indonesia and banks were fading all over the place in korea in japan indonesia and other countries at the time one of your colleagues hani sander was based in hong kong and she saw me on some weekends she knew i was commuting to seoul almost every week and she joked with me she said son i would steal your passport so you couldn't travel to korea why are you still hanging in there well there's no hope at all you know but eventually things turn around and so jumping to the end a little bit you you finally conclude the deal 15 months afterwards um new bridge capital comes out you're giving away the story how long it took us i won't give it away tell us tell us so the the story is the book is about the saga of the negotiations but then it also discussed what new bridge capital this private equity entity does once you buy korea first bank and and how that story i think seeks to dispel some of the bias against private equity which is you know highly leveraged borrow people's money buy something um strip it down pay yourself compensate the partners well and then sell off the rest that wasn't the plan and that wasn't the experience of of kfb so i would say in a nutshell explain the the key points of of your ownership of the and how you turned it around yes i remember we eventually signed the definitive document to buy this bank after a grueling many months of negotiation ups and downs sometimes despair sometimes hope eventually we signed the transaction and uh i called david bonderman to tell him that we signed and the only thing he said was congratulations but now the hard part starts so all that work you know all those sleepless nights he didn't think hard enough because what really matters is what you do with this investment with this bank after you have invested henry kramves of kkr is very fond of saying i hear him say this many times that any idiot can invest in the company can buy a company it is what happens afterwards that really matters that indeed is the case i think there is misunderstanding in the market that private equity operates in such a way that it buys cheap and sales there and make money on the difference or if buys a company strip the assets pay themselves dividends without regard to the health of the company and that's how private equity makes money i can't rule out some people do that but that's not our experience if you want to stay in a business in private equity if you win the trust of your lp's limited partners to give money to you to manage like the state pension funds corporate pension funds then you really have to show how you create value and the way we created value was to take over control of the bank install what we considered to be a world-class management team and we built a risk management system so that we reduced the bad loan ratio to a minimum this bank and many other korean banks failed because of lack of risk management system so that loans became bad loans borrowers were not able to pay back the loan because they were not qualified borrowers in the first place so we installed a risk management system that eventually brought our bad loan ratio from more than 30 percent when this bank failed to less than one percent when we went into the operation after a couple of years and we grew the bank four times during the time we owned it you know initially the bank was overstaffed because by the time we took over the assets in the bank became a skeleton of his former self so many bad loans disappeared or taken over by the government so it became a small bank but our staff was still more or less the original size and a decision had to be made whether to cut the payroll to fit into the asset size of the bank or what and our ceo eventually rubio cohen who became the ceo of the bank made the right decision to grow the body into the clothes as opposed to cut the clothes to feed the body so with redundant employees we built a larger business and eventually became very profitable we made more than 200 million dollars in the first year on the invested capital of 1 billion dollars so 20 more than 20 in the first year and that's how we created value and you know without going into all the other uh bullets you your management dodged before the exit i mean you after an investment a combined investment new bridge in the government of about 900 million dollars the bank was sold for about three point three or three point four billion dollars is that right five years after you purchased it yes so i have to learn it i'm sorry i have to confirm it now you're awesome yes but that's through the end of the story yeah but not really because there's another book to come i understand but anyway um so that leads to one of the uh one of the audience questions that you know uh that this was a very the korea first bank was a very successful marriage but could you talk about not every deal is successful and so um uh this is a question from brian triger he wants to know if you could describe one of the asian funerals that newbridge or pag subsequently attended and what lessons you may have learned from that of what you might have done differently in one of those particular deals it is very difficult to talk about failures especially if the feeders done by your competitors but you don't have to go very far than the united states to look at the failures around you during this particular recession you know the lockdown induced recession a number of companies have failed and many of them were owned or controlled by private equity firms toys r us i think failed the last year or even earlier before the covet crisis hit and i think this year you saw retail giants you know ranging from macy's to bloomingdale and all that even uh j crew which of course was owned by private equity firms neiman marcus all these firms failed in the crisis and in 2008 and 2009 many of the private equity-owned firms failed and the reason for that in fact i looked very deeply into this issue you know private equity is supposed to outperform the public market private equity is supposed to provide outsized returns to limited partners or investors but when you fail in your investments obviously your investors lose a lot of money and how that happened and i think that if you look at the data of private equity you would discover in fact many private equity deals make money by taking on leverage so in both years leverage would of course juice up your return but in the dummy year leverage can kill you when the company's cash flow dries up like many companies did this year then obviously the leverage becomes very very dangerous so leverage is double source double edged sword it can help you it can also kill you so many failures can be attributed to over leverage by private equity firms and data show that in america typically the leverage ratio in acquisitions the so-called leverage the buyouts is much much higher than asia and we mostly in asia we have some portfolio companies in the united states and in asia it is exceedingly difficult to get leverage especially in china it's almost impossible to get leverage but even if leverage or as a way available in asia as in the united states i as a very conservative investor wouldn't want to take so much leverage knowing that crisis is almost inevitable you know economic cycles are inevitable so you have to be prepared for rainy day at any time the um and a number of uh participants also would like your your view on the lone star investment in korea which was also a bank investment um and you know what your opinion is and what the difference between your deal was and the lone star investment and if you could for the audience quickly summarize what the lone star deal was about okay there are actually a number of lone star deals lone star is a firm i highly respect and they have done very good deals their first deal was actually in japan they acquired a bank a citibank called tokyo sowa bank which they renamed as tokyo star bank and they made a lot of money out of that bank and after five years they sold it to another private equity firm which invested about a billion dollars it was total wipeout so not every private equity firm makes money lone star made a lot of money and his successor investor lost a lot of money almost tanked that particular private equity firm now lone star started to look at korea exchange bank after we acquired korea first bank our bank deal was different because we it was a government assisted bank deal meaning that the government put money into that bank the government nationalized that bank and then sold it to us but korea exchange bank was government controlled but it was still functioning back and they were negotiating with the government to buy the control of that particular bank many things happened in that process there were some problems with certain members of lone star team which really got them into trouble some legal trouble as well but i think they made the best effort to turn around that particular bank and eventually i think that bank became very healthy and lonestar made a lot of money although i think over some issues how the bank was sold by government officials you know whether there were problems in that sale process became very controversial which really doesn't surprise me because every bank controlled asset if sold receives a lot of public scrutiny and so you just have to go through that process and particularly in korea where the structure of the banks and the chable and the expectations of lending to the chables and the government it was all very it was all very clubby at the time and it wasn't structured according to just business principles you write in your book about your deal about korea first bank only with hindsight could i fully appreciate the extent to which nationalistic sentiment influenced the government's attitude and approach to the deal and you've you've discussed that just recently and then and showed and and so far but here we are let's jump forward till today i mean you learned lessons from that and you've done deals in other countries including china but what about today i mean there's a surge in nationalism in asia it's not aided by the fact that there are trade disputes not just with china but with korea and you know u.s korea and japan to some extent so you know how would your would your deal be doable today in today's environment or how would you have to approach it differently if any differently probably not it was unusual time at the time and today for example if you want to buy control of a bank it's almost impossible if you want to own four percent of a bank by a foreign investor and that's probably the limit and most i don't think you can own more than 10 percent of the bank and that is by banking regulation but if the bank were distressed then that rule could be relaxed has happened in 98 and 99 during the crisis in almost all markets you know especially in the united states banking is under such tight regulation that foreign control of a bank is almost impossible you won't be able to get approval from the fed i think that foreign investment especially the right kind that is that comes with technology expertise and skills is good for the recipient country we had some experience also taking over control of a bank in china and at the time they were scraped out whether or not china should allow american investor to take over control of a bank and eventually i think rationality prevailed we were able to do so but the difference between korea and china at that time was that korea was almost forced to take foreign capital it was a condition imposed upon them by world organizations and china had plenty of capital what they didn't have was a credit culture international best practice in managing banks and how to really run commercial bank so all the major banks in china by 2002 were laden with bad loans as high as 40 percent of total assets so china made a conscious decision to bring in foreign capital to help restructure and reform their banks even though they didn't need the capital they just needed the expertise i think capital and expertise really would help the reform of a banking system for example in 2008 and 2009 the crisis what you would call a global financial crisis even though it didn't really spread to asia and i'll explain why started with the collapse of lehman brothers bear stearns aig all these large american financial institutions everybody was in trouble goldman had to risk capital from warren buffett bank america had to do so as well european banks failed left and right and center so it was a huge crisis in 2008 2008 and 2009 but the reason i object to the term global financial crisis is because none of that happened in asia none of the banks failed in asia in 2008 and 2009 why because they learned a good lesson from the 98 99 eastern financial crisis all the banks were well managed well capitalized with very strong risk management system so they were all spared and this time around in this lockdown induced recession in american economy gdp dropped nine percent year over year in the second quarter worse than 2008 2009 did any bank fail in the united states no they didn't fail none of them has failed the reason is after 2008 and 2009 all the banks learned the lesson regulators learned the lesson and now the banks are well capitalized and with very strong compliance and risk management culture so now the banks are resident imagine if banks failed today as they did in 2008 in the middle of this virus induced recession how much worse a situation we would be in right so foreign investment brought in experience skills and culture that really helped the country and i believe it used to be the case it is still the case and and which brings us to today um banking obviously the financial sector is something unique so given um that that was that was the subject of your book but today with the pandemic and the number of companies and economies under duress a number of the um our participants tonight would like to know what lessons you learned from the korea first bank experience that you can apply to today's condition and where are where do you see the opportunities for private equity in the current economic um predicament environment in asia which markets which sectors the reason that korea went into so much trouble as other countries indonesia a country you're familiar with was because there was too much debt in the system the societal debt was at a very high level in 1998 the average debt to equity ratio for all the coverage in the united states was about 78 that to equity ratio 78 in korea for the large tables or conglomerates the average was five times and that's how levered korean banks were so some banks some uh borrowers had even higher that equity ratio and so if you have so much that in the system of course a crisis when it comes becomes very very severe and i think the lessons learned is to make sure that you know that economies go through cycles the down cycle is inevitable so you have to be prepared for a down cycle and therefore having enough cash working capital is very important the same is true for carburetes as for for banks and in in in today given the covid pandemic where are you seeing the most vulnerability in asia which markets and therefore is that does that create a greater opportunity for the kind of expertise whether it's financial or management expertise for private equity firms like pag where are you focusing yes you will find that through this crisis some of the sectors are probably permanently impaired you know if you look at travel if you look at you know maybe airline business if you look at cruise business some of the businesses are maybe long-term impaired so even though they're down so much it'll be very difficult for you to make an investment because you don't know if they will ever come back but the crisis also revealed some very good opportunities for example e-commerce is doing extremely well you know we are a large shareholder of tencent music entertainment which is the largest digital music streaming business in china we have 800 million unique monthly users the company is listed on i think new york stock change or in any case in the united states revenue ebitda cash have all been up this year i don't have any inside information it's all based on the public information so even though the economy has suffered from the lockdowns but this business is doing extremely well we own a business the largest dairy milk cow milk business in china called yuran dairy and our ebitda this year went up 40 and i scratched my head i didn't understand why that was the case even in the middle of a long time and i was told or i summarized eventually that people in china finally discovered that the milk that does the body good as you hear in advertisements in america all the time so people started to consume milk in large quantities so you would find some interesting opportunities revealing themselves in a crisis and this is a good time to buy because valuation is much more depressed than in the past you just have to be very careful but by and large we think that businesses which cater to private consumption in asia are the best bets not banks anymore no banks well you you you got out of that one so congratulations and i might want to point out that uh i i asked you when we were preparing for this whether the korea first bank negotiations had been the most excruciating uh longest ones for you and you said actually no and a longer one is going to be the subject of your next book i'll leave it at that but you know since you don't want me to give too much away unfortunately i wish we could keep talking but um our hour is almost up i just want to uh thank you again for your your storytelling and i want to let the audience know that this is a book that is if you're very into private equity you'll learn something if you're interested in korea and asia you'll learn a lot if you have no financial knowledge you'll learn a lot because sean writes in a way he demystifies these very complex banking and negotiating issues in uh very in layman's terms and very easy to understand analogies and if you think that bank deals are boring i'll just tell you that this one involves wiretaps code names and as as sean mentioned sort of old technology like fax machines and fax machines that can run out of paper just when a very important bid is coming in so there is it's a rip roaring tale and i would just like to thank you again for speaking and and i'm going to turn it back to charlie coker thank you very much thank you so very much well thank you jonathan and thank you dr sean for for an uh amazing conversation this evening um we very much like to um thank uh to let people know that the book will be available i think it's coming out either today or tomorrow and it can be either purchased or pre-ordered on amazon.com it's released today today released today well thank you for that so it's available on amazon today um when i had put in it was a pre-order the other day so um and as jonathan said it's a fascinating story and a really a scitilating story um and we'd also like to thank uh our partners um who helped promote this uh program um there you'll be able to see them on the slide that will be coming up shortly we also like to um encourage people to join as a member of asia society southern california or to donate to be able to support programs like this which we bring to you for free um and that site will be coming up shortly as well so um we'd also like to let you know that our next program which we'll be talking about the world in transition uh will be coming up on um october 21st at five o'clock pacific time and we'll be featuring a conversation with ambassadors john emerson and nina hachigian and als and jonathan will be returning as a moderator and hope that you will be able to join us for that as well so thank you again for joining and have a good evening you