China’s Bad Debt Bank Cinda Said to Get Approval for $3 Billion Hong Kong IPO

November 9, 2013 Leave a comment

China Cinda Said to Get Approval for $3 Billion Hong Kong IPO

China Cinda Asset Management Co., one of four funds created in 1999 to buy bad debts from the nation’s banks, won approval from the Hong Kong stock exchange for an initial public offering, said two people with knowledge of the matter. The state-controlled asset manager plans to start gauging demand next week for the share sale, which may raise as much as $3 billion, said the people, who asked not to be identified because the information is private. Cinda, a legacy of China’s efforts to clean up a 1990s bad-loan crisis, has expanded into a financial firm involved in everything from investment banking to trusts and real estate. The share sale would help revive the IPO market in Hong Kong, where proceeds are rebounding from a nine-year low.

A $3 billion IPO would be the city’s biggest since November 2012, when People’s Insurance Company (Group) of China Ltd. raised $3.6 billion, according to data compiled by Bloomberg. A Hong Kong-based external spokeswoman for Cinda couldn’t immediately comment on the status of the IPO.

Companies raised $8 billion through IPOs in Hong Kong last year, the lowest since 2003, Bloomberg data show. Proceeds have grown to $11.3 billion this year, more than triple the value for the same period of 2012, according to the data.

Bank of America Corp., Credit Suisse Group AG, Goldman Sachs Group Inc. and UBS AG are among banks working on Cinda’s share sale, the people said.

Foreign Investors

China’s Ministry of Finance holds an 83.5 percent stake in Cinda, while the national pension fund owns 8 percent, according to a bond prospectus published in October last year. Zurich-based UBS holds a 5 percent interest, while Citic Capital Holdings Ltd. controls 2 percent and Standard Chartered Plc owns 1.5 percent, the document showed.

Cinda raised 10.4 billion yuan ($1.7 billion) selling a 16.5 percent stake to the pension fund, UBS, Citic Capital and Standard Chartered in March 2012, valuing the company at 62.9 billion yuan.

The company had 20,488 employees and 31 branches across China by the end of 2011, the bond prospectus showed. It has subsidiaries involved in financial leasing, fund management, insurance and real estate, according to Cinda’s website.

Cinda recovered 240 billion yuan from 1.5 trillion yuan of bad loans between 1999 and 2011, according to the prospectus. As of the end of last year, it held stakes worth at least 45 billion yuan in 136 state-owned companies, according to China Chengxin International Credit Ratings Co.

The Chinese government set up Cinda, China Orient Asset Management Corp., Huarong Asset Management Co. and Great Wall Asset Management Corp. in 1999 to help rid the banking industry of 1.4 trillion yuan of non-performing loans. Authorities initially gave the agencies 10 billion yuan of capital each and 10 years to offload the bad debt.

To contact the reporter on this story: Fox Hu in Hong Kong at fhu7@bloomberg.net

Filed under Macro Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a comment