By Yvonne Lee
HONG KONG--China Huarong Asset Management Co. on Monday
published a preliminary prospectus on the Hong Kong Stock Exchange
website for an initial public offering that could raise between $2
billion and $3 billion.
The potential listing would make Huarong--China's largest
bad-loan buyer by assets--the second such company to go public
after China Cinda Asset Management Co. (1359.HK) raised $2.8
billion in a Hong Kong offering in December 2013.
A listing application is the first step toward getting approval
from the Hong Kong exchange for an IPO.
The proposed deal could be one of the largest IPOs in Hong Kong
during the third quarter. It also comes as the city has overtaken
the U.S. this year as the world's top venue for IPOs, riding a
steady stream of multibillion-dollar brokerage listings. IPOs in
Hong Kong raised $17.2 billion in the first half of this year,
beating the New York Stock Exchange's $13 billion, according to
data provider Dealogic.
Established in 1999, Huarong is one of four large
asset-management companies in China that helped to resolve some 1.3
trillion yuan ($208.4 billion) of bad debt at the country's top
four state-run commercial banks in the early part of this century's
first decade. Known as bad banks, the companies bought soured loans
at a discount from China's big state lenders.
According to the preliminary prospectus, the Beijing-based
company reported a 23% rise in net profit to 10.7 billion yuan last
year, driven by higher income from distressed debt assets.
China's cooling economic growth in recent years has fueled a
surge in bad debt in the country's banking system and other
financial sectors, which makes bad banks such as Huarong and Cinda
even more attractive to investors. Cinda's stock offering attracted
interest from distressed-debt investors around the world including
New York-based Och-Ziff Capital Management Group LLC (OZM). Shares
of Cinda have gained 6.4% since listing.
Proceeds from Huarong's potential offering will be used to
develop its distressed assets management and investment business,
the document said. Investment bank China International Capital
Corp., Citigroup Inc. (C), Goldman Sachs Group Inc. (GS), HSBC
Holdings PLC (HSBC) and ICBC International are the sponsors of the
deal.
To enhance its competitiveness, Huarong last year introduced
eight strategic investors--including Goldman Sachs and Warburg
Pincus LLC--although the Ministry of Finance remains the
controlling shareholder of the company. The other investors are
CICC, Malaysian sovereign-wealth fund Khazanah Nasional, China Life
Group, Citic Securities International, Chinese state-owned food
major Cofco Corp. and conglomerate Fosun International Ltd.
(0656.HK), the document said.
Write to Yvonne Lee at yvonne.lee@wsj.com