Oaktree, China Cinda form distressed assets JV
Oaktree Capital Group has entered into a joint venture with China Cinda Asset Management Corp. that will see the two groups invest in distressed assets in China. Cinda was originally set up to absorb non-performing loans (NPLs) from China’s Big Four state-owned banks, so the partnership could theoretically offer Oaktree access to assets that foreign investors have found it difficult to quantify, let alone invest in.
Cinda is poised to raise as much as $2.46 billion through a Hong Kong IPO and Oaktree is one of 10 cornerstone investors that have agreed to cover up to 44% of the offering.
The joint venture, which is still subject to negotiation and execution of definitive documentation, will be equally owned by Oaktree and Cinda. In addition to investing in China, the two parties will cooperate on distressed assets investments in other markets.
"We are excited to partner with Cinda, the market leader in distressed investing in China. Cinda's experience and expertise in China is unparalleled and will afford us a unique opportunity to participate in China's distressed debt markets. At the same time, we look forward to sharing our global insights and expertise with Cinda," John Frank, managing principal of Oaktree, said in a statement.
Cinda was one of four asset management companies (AMCs) established in 1999 to absorb the banks' bad debts. It was tasked with managing NPLs at China Construction Bank specifically, which needed to be restructured and recapitalized ahead of its IPO.
Cinda is understood to have since 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. It is headquartered in Beijing and has a network of 31 branches, nine first-tier subsidiaries and branches of the first-tier subsidiaries, with more than 18,000 employees.
The company 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.
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.
Oaktree had $79.8 billion in assets under management globally as of September 2013. It emphasizes an opportunistic, value-oriented and risk-controlled approach to investments in distressed debt, corporate debt, control investing, convertible securities, real estate and listed equities.
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