China Cinda Asset Management Co. (CCAMCZ), one of four funds created in 1999 to buy bad debts from China’s banks, is close to selling a stake to investors including UBS AG (UBSN) for $1.6 billion, said people with knowledge of the matter.
UBS will buy 5 percent of Cinda, while China’s National Council for Social Security Fund will acquire 8 percent, two of the people said, asking not to be identified as the information is private. Citic Capital Holdings Ltd., part-owned by China’s sovereign wealth fund, will purchase 2 percent while Standard Chartered Plc will buy 1 percent, the people said.
State-controlled Cinda is a legacy of a 1990s bad-loan crisis in China that took a decade and more than $600 billion to clean up. The company is selling a stake in itself as it prepares an initial public offering and expands into businesses such as brokerage and real estate investing.
The sale of the 16 percent stake will require regulatory approval in China, one person said. Spokespeople for UBS, Citic Capital and Standard Chartered declined to comment. Calls to Cinda’s Beijing-based media office and the national pension fund’s external affairs office went unanswered.
Caixin Online reported the stake sale plan on March 7, citing unidentified people.
China’s cabinet in June 2010 allowed Cinda to become the first of the four bad-loan managers to restructure into a new firm with capital of 25.1 billion yuan ($4 billion) and expand its business scope to principal investment, brokerage and financial advisory. Cinda owns ventures in the securities, funds management, insurance, futures, trust, financial leasing and real estate industries.
Beijing-based Cinda will proceed with an IPO after completing a stake sale to strategic investors, Chairman Hou Jianhang said in a statement last month. Cinda’s shareholders’ equity totaled 37.6 billion yuan at the end of last year and the company posted profit of 8.25 billion yuan for 2011.
Zurich-based UBS last month said fourth-quarter profit dropped 76 percent as its investment bank reported a second consecutive quarterly loss. Alex Wilmot-Sitwell, co-head of UBS’s Asia-Pacific operations, said in April last year that Switzerland’s biggest bank aims to double revenue from China in three to four years.
China set up Cinda, Huarong Asset Management Corp., Great Wall Asset Management Corp. and Orient Asset Management Corp. in 1999 to clean up the balance sheets of the nation’s biggest lenders after they racked up bad debts. The government initially gave these agencies 10 billion yuan of capital each and 10 years to offload non-performing loans.
Cinda had purchased and inherited 1.4 trillion yuan of non- performing loans, including about 390 billion yuan of bad debts from China Construction Bank Corp. and China Development Bank, by the end of 2008, according to its website. The company had disposed of 764 billion yuan of soured assets and recovered 204 billion yuan of cash by 2008.
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