China Bad Bank Cinda Raises $2.4 Billion to Buy Distressed Debts
China Cinda Asset Management Co. (1359), one of the nation’s four state-owned bad-loan managers, raised HK$18.5 billion ($2.4 billion) in Hong Kong’s biggest initial public offering in a year as it prepares to take on more distressed assets.
The company sold 5.3 billion shares at HK$3.58 each, the top of the price range, Beijing-based Cinda said in a statement to the Hong Kong stock exchange today. The stock will start trading tomorrow, it said. The HK$18.5 billion is the company’s net proceeds, according to the statement.
The IPO will help Cinda, created in 1999 to buy bad debts from state-owned banks on the verge of insolvency, to profit from a new round of non-performing loans following a $6.5 trillion lending spree since the end of 2008 as the government combated an economic slowdown. The company plans to use about 60 percent of the proceeds to enhance distressed asset management, which remains its core business after generating at least 30 percent in pretax returns on average equity since 2010, according to its prospectus.
Non-performing loans at Chinese banks increased for an eighth consecutive quarter in the three months ended Sept. 30 to 563.6 billion yuan ($93 billion), extending the longest streak in at least nine years. They account for just 0.97 percent of the nation’s outstanding loans, according to the banking regulator.
The company also plans to use about 20 percent of the IPO proceeds in its financial investment and asset management business, with the remainder to recapitalize its financial subsidiaries that now cover securities, trust, leasing and insurance, according to the prospectus.
Cinda is benefiting from a resurgent IPO market in Hong Kong as investors bet the Chinese economy will stabilize. The sale 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.
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