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Goldman, Khazanah among investors nearing Huarong deal

Wednesday, 23 July 2014

A sign of US bank Goldman Sachs on the floor of the New York Stock Exchange. The bank and Warburg Pincus are among investors said to be close to a deal to buy 20% in China Huarong Asset for US$2bil. - EPA

A sign of US bank Goldman Sachs on the floor of the New York Stock Exchange. The bank and Warburg Pincus are among investors said to be close to a deal to buy 20% in China Huarong Asset for US$2bil. - EPA

HONG KONG: Goldman Sachs and private equity firm Warburg Pincus are among the investors nearing a deal to buy an up to 20% stake in China Huarong Asset Management Ltd for about US$2bil (RM6.25bil), seeking a share in the profitable business of bad loan management in China.

Other investors preparing to buy into China’s biggest manager of non-performing loans include Malaysian state investor Khazanah Nasional Bhd, China state-backed CITIC Group, China International Capital Corp (CICC), conglomerate Fosun Group and China state-backed COFCO Corp, the people familiar with the matter told Reuters.

Citigroup is the adviser for the deal, according to the people, who declined to be identified as the matter remained confidential.

CICC, Citigroup, Fosun, Goldman Sachs and Warburg Pincus declined to comment. The relevant officials at Huarong, COFCO, CITIC and Khazanah did not immediately respond to calls and emails seeking comment.

State-owned bad debt managers like Huarong are benefiting from a rise in non-performing loans in China as the economy slows. The company had assets worth US$65.7bil under management at end-2013 and its net profit for last year jumped 44% to 10.1 billion yuan.

Huarong was planning to sell the stake to strategic investors ahead of an eventual initial public offering and the seven investors were likely to sign an agreement over the next month, the sources said.

China’s biggest banks have said they want to manage their own non-performing loans, attracted by the profits of the bad debt managers like Huarong.

Huarong’s smaller peer, state-owned China Cinda Asset Management Co Ltd, raised US$2.8bil in a Hong Kong IPO last year. It reported a 26% rise in net profit to 9.1 billion yuan in 2013.

Like Huarong, Cinda sold a stake to strategic investors that included China’s social security fund NSSF, CITIC Capital, UBS AG and Standard Chartered Bank ahead of its IPO. – Reuters

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