Norway fund, Oaktree among anchors for China Cinda IPO
Norway’s sovereign wealth fund and Oaktree Capital Management are two of 10 cornerstone investors that will cover up to 44% of China Cinda Asset Management Corp’s IPO. The company, originally set up to absorb non-performing loans (NPLs) from China’s Big Four state-owned banks, is looking to raise as much as $2.46 billion through the Hong Kong offering.
Norges Bank Investment Management and Oaktree will be joined by Och-Ziff Capital Management, Farallon Capital Management, Rongtong Capital Management, Ping An Insurance's asset management arm, Shandong State-owned Assets Investment Holdings, and a unit of power firm Guangdong Yudean Group, The Wall Street Journal reported.
Cinda, which is majority-owned by China's Ministry of Finance, will sell 5.3 billion shares at HK$3.00-3.58 apiece, valuing the company at 1.13-1.31x its 2013 book value, or $16.3 billion.
CITIC Capital, UBS and Standard Chartered invested in Cinda last year alongside the National Council for Social Security Fund (NSSF), paying $1.7 billion for a 16.5% stake. Boyu Capital is also understood to be an investor.
Of the four asset management companies (AMCs) established in 1999 to absorb the banks' bad debts, Cinda is the most profitable. It announced that profit attributable to shareholders reached RMB4.06 billion ($667 million) for the six months ended June 2013, up 36% year-on-year. Total assets stood at RMB283.6 billion, an increase of 11% on December of last year.
While NPLs in China are expected to increase, potentially offering more business to Cinda, concerns have been expressed over the firm's lack of clarity on its pricing policies, recovery rates and plans to diversify into other areas of financial services.
Cinda was originally tasked with managing the NPLs at China Construction Bank, which needed to be restructured and recapitalized ahead of its IPO. Cinda has accumulated a sizeable real estate portfolio by foreclosing on bad debts, as well as taking stakes in a wide range of companies through debt-for-equity swaps.
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