This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Warburg Pincus, Goldman Take Stakes in Huarong

NEW YORK (The Deal) -- Leading Chinese bad-debt investor China Huarong Asset Management Co. announced Thursday that it will sell stakes in itself to eight foreign and domestic investors, ahead of a projected initial public offering in Hong Kong.

The move comes as opportunities for bad-debt acquisitions are seen to be opening up, as Chinese banks' non-performing loan portfolios burgeon and the economy struggles with the consequences of years of massive lending by both official lenders and the shadow banking system.

The eight, including New York private equity firm Warburg Pincus LLC and Goldman, Sachs & Co., as well as Malaysian sovereign wealth fund Khazanah Nasional Bhd., will invest a total of 14.54 billion renminbi ($2.36 billion) for a 20.98% stake in Huarong. The share each company will take has yet to be released.

The domestic buyers, China International Capital Corp., China Life Insurance Group Co., CITIC Securities International, Cofco Corp. and Fosun International Ltd. include both state and private sector investors. The deal has been approved by the State Council and other supervision authorities, according to the Huarong statement, which was reported by the official Chinese media. Huarong is currently a state-owned enterprise, 98.06% owned by the Ministry of Finance.

Earlier this year, Reuters reported that about 20 investors, including Kohlberg Kravis Roberts & Co. LP and Blackstone Group LP, were expected to submit first round offers for the pre-IPO investment.

Chinese banks' nonperforming loans have climbed for almost three years, the longest run since 2004, according to Bloomberg, which said Huarong reported a profit of Rmb11.8 billion for the first half of this year before provisions.

Huarong Chairman Lai Xiaomin told a Beijing press briefing on Thursday that the IPO is expected before the end of 2015.

Yet even as Huarong prepared to go public, its listed peer China Cinda Asset Management Co. suffered a share selloff in Hong Kong, after reporting disappointing first-half profit. The shares fell 7.1% to HK$3.92, as Beijing-based Cinda reported net profit of Rmb5.3 billion, below analysts' expectations. Cinda priced its IPO in December last year at HK$3.58, and has traded well above that level for most of this year - despite coming within a single cent of the IPO price at its low point in May.

Cinda and Huarong were among four bad loan companies set up by the government in 1999 to soak up problem debt on the books of China's financial institutions. They have reportedly bought and sold about Rmb3 trillion in the years since then.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $129.62 -2.20%
FB $79.34 -1.50%
GOOG $532.32 -1.44%
TSLA $247.46 -0.11%
YHOO $42.85 -1.46%

Markets

DOW 18,041.54 -190.48 -1.04%
S&P 500 2,104.20 -21.86 -1.03%
NASDAQ 5,032.7510 -56.6110 -1.11%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs