China Cinda Said to Seek Up to $2.45 Billion in Offering

China Cinda Asset Management Co., one of four funds created in 1999 to buy bad debts from the nation’s banks, plans to raise as much as HK$19 billion ($2.45 billion) in a Hong Kong initial public offering, said people with knowledge of the matter.

The state-controlled asset manager plans to sell shares at HK$3 to HK$3.58 apiece, said the people, who asked not to be identified because the information is private.

Cinda’s listing is the latest step in its transformation from an asset manager established to clean up soured loans from the 1990s into a financial company with businesses spanning trusts, real estate and investment banking. The IPO values Cinda at 1.1 to 1.3 times its estimated year-end book value, IFR Asia reported earlier.

“That doesn’t sound too expensive but the concern is that they may be underwriting too much risk,” said Edmond Law, an analyst at UOB Kay Hian Holdings Ltd. in Hong Kong. “Investors may be skeptical on the business model asking how are they going to ensure profitable returns from the banks’ non-performing loans.”

The sale of about 5.3 billion new shares will account for 15 percent of Cinda’s enlarged capital, according to a Nov. 12 term sheet. IFR, which reported the price range earlier, said the number of shares on offer may change.

Cinda’s IPO is 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. Companies have raised $11.5 billion in Hong Kong initial sales this year, exceeding the $8 billion for all of 2012, the data show.

UBS Sale

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

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 has subsidiaries involved in financial leasing, fund management, insurance and real estate, according to Cinda’s website. At the end of last year, Cinda 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 reporters on this story: Joyce Koh in Singapore at jkoh38@bloomberg.net; Jonathan Browning in Hong Kong at jbrowning9@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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