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The China Orient Asset Management Corporation reported further progress in its mission to resolve bad loans yesterday, announcing it had sold its second batch of distressed assets to foreign investors.
The 2.4 billion yuan (US$289 million) tranche of non-performing loans (NPLs) was purchased by Credit Suisse First Boston (Hong Kong) at an auction last Sunday, where three domestic and foreign bidders participated, it said without giving further details.
The auction followed the debt-clearing firm's successful bid to buy a 130 billion yuan (US$15.6 billion) portfolio of non-performing loans last month from China Cinda Asset Management Corporation.
"These achievements reflected China Orient Asset Management Corporation's confidence in and ability of building an 'Oriental Carrier' in China's non-performing loan market," an Orient spokesman said.
It was also entrusted by securities regulators in October to take into custody the collapsed Minfa Securities.
Winning new business is crucial to China's asset management companies (AMCs), which are undergoing a key transition to commercial entities from policy-oriented debt-clearers.
China's four State-owned AMCs - China Huarong, China Cinda, China Orient and China Great Wall - were set up in 1999 and took over a total of 1.4 trillion yuan (US$168 billion) in NPLs from the nation's four State-owned commercial banks.
Their establishments were a major step by the Chinese Government to reform the NPL-ridden banking sector, and followed a 270 billion yuan (US$33 billion) injection of capital into the four banks.
The AMCs were recently given permission to accept new deals as trustees and purchase bad assets on a commercial basis, a long-awaited decision that extends their life expectancy beyond the original 10-year period.
They have quickened the pace of their NPL-disposal work in recent months, hoping to finish the policy-oriented job as early as possible.
To attract potential investors for the second auction, China Orient said it had reduced the size of the package from one involving more than 300 borrowers. The tranche it eventually sold consisted of loans to 180 enterprises based in Northeast China's Heilongjiang Province.
The company also said the deal was Credit Suisse First Boston's (CSFB) first foray into China's distressed debt market. CSFB officials were not available for comment.
Foreign investors have shown great interest in China's huge distressed debt market, although they have complained about inadequate transaction flows.
China Orient disposed of 43.3 billion yuan (US$5.2 billion) in non-performing assets last year, recovering 5.22 billion yuan (US$629 million) in cash, which outstripped a 4 billion yuan (US$480 million) target set by the Ministry of Finance.
(China Daily December 17, 2004)
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