China’s biggest ‘bad bank’ raises $2.3bn

Huarong AMC shares priced at HK$3.09 per share and are expected to commence trading on 30 October.

China Huarong Asset Management Company, China’s largest distressed debt manager, has raised HK$17.8 billion ($2.29 billion; €2.08 billion) through an initial public offering in Hong Kong, Thomson Reuters reported, citing sources close to the deal.

The state-owned entity priced the IPO at HK$3.09 per share, at the lower end of the HK$3.03 and HK$3.39 marketing range.

China Huarong was not available for comment at time of publication.

China Huarong sought up to $2.8 billion through the listing and offered an aggregate of 5.8 billion shares on the Main Board of The Stock Exchange of Hong Kong Limited (SEHK). Dealings in shares are expected to commence on 30 October 2015, with the stock code 2799, according to marketing documents. However, DealStreetAsia reported that cornerstone investors, which are prevented from trading for up to six months, took up the majority of the offering. An announcement of allotment results is expected on Thursday. 

Sixty percent of the proceeds will be used for the firm’s core business of distressed asset management. Thirty percent will go towards developing the firm’s financial services business and the remaining 10 percent towards developing the asset management and investment business.

Huarong started out as a distressed asset management firm but has branched into other ‘through-the-cycle’ businesses to provide an array of financial products and services.

Lai Xiaomin, chairman of China Huarong, said in a statement announcing the listing last week: “We intend to leverage our traditional strengths in distressed asset management, further enhance our financial services platform, endeavor to establish a competitive third-party asset management business platform, advance our internationalization process, achieve sustainable development and become a leading financial holding company.” 

The carrying amount of China Huarong’s distressed debt assets held within the acquisition-and-disposal business and the acquisition-and-restructuring business were RMB 34.6 billion ($5.4 billion; €4.9 billion) and RMB 212.5 billion ($33.4 billion; €30.2 billion) respectively, as of June 30 2015. The company has an additional asset portfolio of RMB 6.6 billion ($1.04 billion; €939 million). In total, it has RMB 734.5 billion ($115.6 billion; €104.6 billion) in assets under management.

Among China’s four AMCs, the group said it is the first to dispose of distressed asset packages through an international practice, the first to be commissioned by the People’s Republic of China government to wind down a large private conglomerate and the first and only AMC to establish a Sino-foreign equity joint venture asset management company to focus on distressed asset-based special situations investments. China Cinda Asset Management Corp raised $2.5 billion in capital through a Hong Kong IPO in 2013.

Goldman Sachs, HSBC Corporate Finance, China International Capital Corporation Hong Kong Securities, Citigroup Global Markets and ICBC International Capital were joint sponsors on the listing.