Jack Rodman's omnipresent baseball cap marks the Los Angeles native as a Yank even before he opens his mouth. And when Rodman speaks, it's even clearer that he's one of those pushy Americans. "I think I'm the worst diplomat in the world," he concedes. "I'm not going to beat around the bush. I don't have the time."
Yet that brash style has helped Rodman, 55, reshape the face of Asia. This accountant preaches the virtues of cleaning up financial systems by purging bad debt--and spends his days in Tokyo working at that task for Ernst & Young Asia Pacific Financial Solutions LLC, where he is a managing director. He's convinced that growth can resume only when dud loans are eliminated. Asia certainly has plenty of work for Rodman. Ernst & Young estimates the region has $2 trillion in bad debts, from South Korea ($104 billion) to China ($480 billion) to Japan ($1.2 trillion).
Rodman's approach is to sell debt as quickly as possible, even if a bank has to price it at pennies to the dollar. That takes the load off the banks, and gets assets into the hands of people who can make a profit from them. Says he: "If you're being operated on for stomach cancer, you don't say to the doctor: `Leave a little in there and I'll come back another time."' He cites Japan's continuing malaise as proof that partial surgery doesn't work.
The past year has been a stellar one for Rodman. Although it has been five years since the region's financial crisis began, many countries are just starting to clean up the mess. In two deals announced last December with a face value of $1.6 billion, Rodman brokered China's first-ever sales of nonperforming loans to foreign buyers. Goldman Sachs and Morgan Stanley were among investors who put up less than 10 cents on the dollar for the paper. Now, Rodman is working on a Chinese deal that's three times larger. In Taiwan, Ernst & Young is brokering sales of $1.5 billion in debt for five clients. In all, Rodman and his staff of several hundred have helped sell off Asian debt with a face value approaching $100 billion since 1998.
Cleaning up financial systems may sound like a good and lucrative cause, but it's exhausting: Rodman's business card lists seven local phone numbers. It's also tedious. In the Philippines, Ernst & Young has an assignment to sell 180,000 delinquent loans held by the National Housing Finance Mortgage Corp., worth $800 million. Calculating everything from the validity of the titles on the mortgages to assessing how much money might be recovered is mind-numbing work. It's also profitable. Rodman's team has brought in $100 million in revenue since 1998.
Rodman's career path mirrors Asia's changing fortunes. In 1985, as a Los Angeles-based managing partner for accountants Kenneth Leventhal & Co., he started tracking the billions of dollars Japanese investors were pouring into U.S. real estate projects, such as New York's Rockefeller Center and California's Pebble Beach golf course. In the early 1990s, as the Japanese bubble deflated, Rodman started monitoring Japanese disinvestment in the U.S. As the problems hit closer to Japan, Rodman moved to Tokyo in 1997 to manage distressed debt sales there. Now Rodman is spending much of his time working out Chinese loans, and he's eyeing a move to Beijing before yearend. "China and India are the last great frontiers in my life," he says.
Rodman has profited handsomely from Asia's troubles. His vacation home in Washington state's Puget Sound boasts a vast wine cellar and is stuffed with Asian antiques. But better they should pay people like him, he says, than take no action. When the Chinese, Indonesians, and Indians are ready to do the right thing, he figures there is $20 billion in foreign capital ready to pour into those countries to buy distressed assets. If Rodman is right, that would pay off indeed--for him, for Ernst & Young, and for Asia.