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China Huarong Asset Management Corp, one of the country's four State-owned bad-debt managers, said it is seeking a partner to set up a venture to dispose of non-performing loans with a face value of 16 billion yuan (US$2 billion).
"The venture may serve as a platform for future bad-loan acquisition," said Zheng Wanchun, executive vice-president of the Beijing-based company, in an interview. "It won't just handle the 16 billion yuan of bad debt."
As many as five international investors are doing due diligence on the 16 billion yuan of loans and an auction will be held this month, Zheng said. Initially, 20 billion yuan (US$2.5 billion) of loans were marketed to investors, who have to submit a price for the assets and the size of the stake they want to have in the venture, he said.
China set up Huarong, Cinda Asset Management Corp, Great Wall Asset Management Corp and Orient Asset Management Corp in 1999 to clean the balance sheets of the four biggest State-owned banks. The companies have a mandate to clear all 1.4 trillion yuan (US$172.8 billion) of "policy loans," or government-directed lending to unprofitable businesses, transferred to them six years ago at face value, by the end of next year.
Huarong, which primarily helps dispose of soured loans for the Industrial & Commercial Bank of China, still has almost 100 billion yuan (US$12.3 billion) of policy loans to deal with, Zheng said, citing statistics from the Ministry of Finance.
The company has two other sales in the pipeline - 1.6 billion yuan (US$197.5 million) of distressed assets from the city of Xiamen in Fujian Province will be auctioned next month and 17 billion yuan (US$2.1 billion) of loans located in Shijiazhuang in Hebei Province will be auctioned in January, Zheng said. Both groups are part of the 22.6 billion yuan (US$2.8 billion) of debt that Huarong bought at discount from the Industrial and Commercial Bank of China earlier this year.
(China Daily November 5, 2005)
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