Roadshows start for asset auction
By Feng Jie (China Daily)
Updated: 2004-08-11 08:36

China Cinda Asset Management Corporation plans to start roadshows soon for an international auction of 10 billion yuan (US$1.2 billion) worth of bad assets.

The first roadshow will be held at an assets resolution fair in Changchun, Northeast China's Jilin Province, on August 23, and an auction will follow soon after, it said.

The 151 units of distressed assets to be sold include liabilities, equity stakes and properties, which are all located in China's three northeastern provinces - Liaoning, Jilin and Heilongjiang.

The assets, which are scattered in a variety of industries such as infrastructure, energy and chemicals, will be sold either separately or in packages as investors demand, the company said.

The deal is expected to refuel interest of foreign investors in China's huge distressed assets market, analysts said. Some of them, including leading investment banks such as Goldman Sachs and Morgan Stanley, have established joint ventures with local asset management companies.

Many investors expect the flow of distressed asset transactions to grow in coming years as Chinese commercial banks clean up their balance sheets in preparation for initial public offerings.

Non-performing loans (NPLs) at China's four State-owned commercial banks still totalled 1.5 trillion yuan (US$180 billion) at the end of June, although they were 400 billion yuan (US$60 billion) less than half a year earlier.

That was after a combined 1.4 trillion yuan (US$168 billion) of NPLs were transferred from the four lenders to four asset management companies (AMCs), including Cinda, in 1999.

But accounting firm Ernst & Young, which was the financial advisor for a few major Chinese NPL auctions, has warned that some foreign investors are losing their interest due to inadequate transactions.

Only five such international deals have been approved or completed in the past few years, out of a dozen or so signed so far, which is slow compared to many other markets, the accounting firm said.

A Cinda spokesman said on Monday the company expected to start resolving nearly 280 billion yuan (US$33.7 billion) of NPLs it recently purchased from two State-owned Chinese banks next year.

Cinda beat the other three AMCs and purchased the assets, categorized as "doubtful" under the internationally-accepted five-category loan classification system, in a widely-watched auction in June from the Bank of China and China Construction Bank. The banks were chosen for a pilot joint-stock restructuring and received a combined US$45 billion capital injection.

"Those assets are in the middle of being taken over," the spokesman said.

Earlier reports said the NPLs will be sold by Cinda in auctions to both domestic and foreign investors.

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