Bain buys Chinese financial leasing business

Lionbridge, which had total leased assets of approximately RMB3 billion ($490 million) as of June 2014, provides lease-back services and leasing asset management to small and medium-sized enterprises (SMEs). It focuses on four industry verticals: heavy duty vehicles, medical equipment, manufacturing equipment and agriculture equipment.

Worth RMB8 billion in 2006, China's financial leasing industry has grown to RMB3 trillion on the back of strong policy support from the government for SME financing solutions. However, the penetration rate remains low compared to developed countries.

Plenty of small businesses remain capital-starved, unable to source funding from traditional banks that favour lending to state-owned enterprises. It is estimated that SMEs contribute 60-70% of China's GDP but receive only 37% of total financing extended nationwide.

As such, leasing companies have emerged as a popular target for private equity. In 2009, a KKR-led consortium paid $160 million for a 30% stake in Far East Horizon, a leasing business owned by trading conglomerate Sinochem Group. The Shanghai-based company listed in Hong Kong in March 2011 and KKR upped its stake later that year.

In September 2013, TPG Capital agreed to sell UT Capital Group to Haitong International Holdings for approximately $715 million, bringing an end a five-year ownership period during which UT Capital has expanded its activity from the construction sector to SMEs in areas such as healthcare, education, printing and packaging, and machine tools.

Founded in 2012, Lionbridge has a network of 174 offices covering 22 provinces, through which bespoke services are provided to local SMEs.

In addition to the standard risk control mechanisms, the company uses a quantitative evaluation model and system that assess credit status and potential clients' repayment ability. It also minimizes operational risks by focusing on valuation, ownership control and liquidity levels of all leased assets.

"Providing tailored retail financing services and connecting financing with business operations are the key characteristics that make Lionbridge's business model unique," Jonathan Zhu, managing director at Bain, said in a statement. "Lionbridge's management has extensive sector expertise and an impressive track record."

Bain is expected to help the company diversify its funding sources and attract strategic investors. It will also provide support on corporate governance, market positioning - including the further development of online financing platforms - and M&A as Lionbridge seeks to accelerate growth.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Financials
• Greater China
• Buyouts
• Bain Capital Asia
• China
• Financial Services
• buyout