PE investors near deal for China NPL manager Huarong - report

According to Reuters, the consortium includes Goldman Sachs, Warburg Pincus, Malaysia's Khazanah Nasional, CITIC Group, China International Capital Corp. (CICC), Fosun Group and COFCO Corporation. An agreement that will see the group take a stake of up to 20% in Huarong is expected to be signed within a month.

Last December, China Cinda Asset Management, another of the four asset management corporations (AMCs), raised $2.9 billion through a Hong Kong IPO. The company previously received strategic investment from the likes of CITIC Capital, UBS and Standard Chartered alongside the National Council for Social Security Fund (NSSF). Boyu Capital is also understood to have invested.

Huarong is the largest of the AMCs with assets of RMB400.9 billion ($66 billion). It was established in 1999 and is majority-owned by the Ministry of Finance, with China Life Insurance holding a small minority stake. The company reported a net profit of RMB10.07 billion in 2013, up 44.7% year-on-year, as its purchases of distressed assets rose dramatically.

The company has said it plans to focus on attracting strategic partners in 2014 as well as preparing to list domestically and overseas.

Huarong accumulates bad assets and then retrieves capital through debt reorganization, recovery, auctions, interest collection and debt-for-equity swaps. In addition to handling NPLs, the AMCs have sought to become more market-oriented, expanding their business to include brokerage operations, fund management and insurance.

However, the uptick in Huarong's distressed asset purchases last year - which can be tied to the slowing Chinese economy - suggests that its core business will remain active.

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• Topics
• Financials
• Expansion
• Greater China
• Restructuring
• Financial Services
• Distress
• China
• Goldman Sachs
• Warburg Pincus Asia
• Khazanah Nasional