KKR Partners With China Orient for Distressed Asset Investment

KKR & Co. formed a venture with one of China’s biggest state-owned bad-loan managers to invest in distressed assets as the nation’s economic growth slows.

KKR will partner with China Orient Asset Management Corp. and an investment firm part-owned by the government-controlled fund manager, China Orient Summit Capital, the companies said in a Thursday press release distributed by Business Wire. The venture will invest in credit and distressed assets in China, and the partners will explore areas for broader collaboration, according to the release.

China Orient Asset Management is one of four Chinese state-owned asset managers set up to dispose of bad loans following a banking crisis in the late 1990s. The country’s nonperforming loans have been rising for four years and reached 1.19 trillion yuan ($180 billion) at the end of September, the highest since the global financial crisis, data from the banking regulator show.

The new venture with KKR offers an opportunity to provide “flexible capital solutions” particularly in the property industry, Edward Han, China Orient Summit Capital’s head of special situations, said in the statement. Real estate “is facing increased macro and funding challenges,” he said.

The nation’s bad-loan managers have been looking for creative ways to dispose of the soured assets they’ve acquired. China Huarong Asset Management Co. and China Cinda Asset Management Co. have been selling troubled assets through Alibaba Group Holding Ltd.’s Taobao online marketplace since last year.