Aug. 30 (Bloomberg) -- Kowloon Development Co., the Hong Kong and Macau developer run by billionaire Or Wai Sheun, will pay 2.19 billion yuan ($290 million) to buy nonperforming loans from China Orient Asset Management Corp.

The two companies will form a venture to manage the non- performing assets, Kowloon Development said in a filing to Hong Kong's stock exchange yesterday. Kowloon Development will own 75.1 percent of the venture and China Orient the rest.

``The management of non-performing loans is relatively underdeveloped in the China market and the company considers the acquisition an opportunity to enter into this market,'' Kowloon Development said in the statement.

China Orient was one of four state-owned asset managers set up in 1999 to clear bad debt taken over from state-owned banks. The asset managers seek to diversify into related businesses and operate more like commercial enterprises.

The assets Kowloon Development is buying are 50 percent of China Orient's nonperforming loans in China's southern provinces of Guangdong and Hainan, the Hong Kong-based company said.

Kowloon Development's shares slid 3 percent to HK$15.84 at 12:15 p.m. in Hong Kong today, after rising as much as 2 percent earlier. The stock had been suspended from Aug. 23 to yesterday.

Today's slide trims the developer's gain this year to 18 percent, matching the gain of the benchmark Hang Seng Index.

Bad Loans

China, the world's biggest market of distressed assets, set up Huarong Asset Management Ltd., Orient Asset Management Corp., Cinda Asset Management Corp. and Great Wall Asset Management Corp. in 1999 to clean up the four biggest state-owned banks, saddled with bad loans built up during decades of government- directed lending to unprofitable businesses.

Financial companies must inform the National Development and Reform Commission of their planned bad-loan sales to foreign investors in the next calendar year by November the preceding year, the statement said.

Loans sold to foreign investors must not involve industries currently closed to overseas investment or those that involve China's national security, the commission, the country's highest economic planning body, said in February.

In November, Cinda and Orient announced plans to sell more than 3.7 billion yuan of bonds backed by delinquent loans to Chinese investors, the first such sale since they began operations.

To contact the reporter on this story: Kyunghee Park in Hong Kong at kpark3@bloomberg.net.

Last Updated: August 30, 2007 00:55 EDT