HONG KONG: A group of 10 investors, including Norway’s sovereign wealth fund and OchZiff Capital Management Group LLC, have together committed to buy about US$1.1bil into China Cinda Asset Management Corp as part of its Hong Kong initial public offering (IPO), people familiar with the matter said.
Cinda, one of China’s four bad debt managers, is seeking to raise US$2.5bil through the Hong Kong IPO and the offer has attracted interest from distressed debt investors, hedge funds to China’s insurance giants.
Together, the so-called cornerstone investors would buy about 45% of the IPO, which is set to be Hong Kong’s biggest this year.
Norges Bank Investment Management, the world’s biggest sovereign wealth fund, has pledged about US$150mil to the IPO, making its biggest ever cornerstone commitment, one person familiar with the matter said.
Norges Bank’s pledge underscored the support from a long-term investor for the IPO that had polarised the Asian investment community, the person added.
The IPO had generated an additional about US$5bil from anchor investors, the person added. Cinda is set to price the IPO on Dec 4.
China Life Insurance Co and OchZiff Capital were each committing US$200mil, while Temasek Holdings unit Farallon Capital Management had agreed to buy US$100mil, people familiar with the matter said.
Oak Tree, the world’s largest distressed debt investor, was pledging about US$53mil, while Ping An Insurance was committing US$75mil to the IPO, the people added.
Cinda, along with its underwriters, had to turn down some bids on the cornerstone tranche due to heavy demand, a separate source said.
Cornerstone investors in IPOs receive a guaranteed allocation in exchange for agreeing to retain their stakes for a set amount of time.
Demand for the IPO is driven in part by the view that China’s financial system is set for an increase in non-performing loans as the economy slows.
That increases the need for the services provided by Cinda and the other three bad debt management firms.
Already bad loans held by Chinese banks climbed by 24.1 billion yuan (US$3.96bil) to 563 billion yuan at the end of September, marking the largest quarterly rise in the volume of bad loans since the fourth quarter of 2005.
The IPO would provide a rare view into China’s financial system with investors keen to scan Cinda’s upcoming IPO prospectus for recovery rates on bad loans, its main holdings and the way in which it values billions of dollars in real estate. — Reuters