HONG KONG--China Huarong Asset Management Co. is completing a
deal to sell a roughly $2 billion stake to a group that includes
Malaysia's state investment arm and Goldman Sachs Group Inc.,
according to people familiar with the matter.
The potential investment in the state-owned "bad bank" comes
ahead of a planned public offering by Huarong and signals a growing
desire among foreign buyers to invest in China's asset-management
firms as the government tackles the banking sector's growing pile
of bad debt.
The investor group includes Goldman Sachs, Malaysian fund
Khazanah Nasional Bhd., New York-based private-equity firm Warburg
Pincus LLC, Citic Private Equity, China International Capital
Corp., Cofco Corp. and Fosun International, according to people
familiar with the matter.
CICC, Goldman and Fosun International declined to comment.
Warburg Pincus, Khazanah, Citic and Cofco couldn't immediately be
reached for comment.
Huarong is one of four asset-management firms the country
established in 1999 to clear some 1.3 trillion yuan ($US211
billion) of bad assets from China's top four state lenders. It is
currently 98.06% owned by the Ministry of Finance, while China Life
Insurance (Group) Co. owns the remaining 1.94%.
Huarong has already had success in raising cash from investors.
In July, it completed its maiden U.S. dollar-denominated bond
offering.
Huarong's planned stake sale would be the second by a Chinese
bad bank after China Cinda Asset Management Co. raised US$2.8
billion in December, drawing interest from investors that included
New York-based Och-Ziff Capital Management Group LLC and Norwegian
sovereign-wealth fund Norges Bank Investment Management. Shares of
Cinda have gained 16% since listing.
Huarong's and Cinda's main business is buying impaired loans
from banks, restructuring the debt and turning a profit in the
process.
China's slower economic growth in recent years has fueled an
increase in bad loans and policy makers in Beijing have been
pushing banks to raise new capital and clean up their balance
sheets. Already, China's biggest lenders have pledged to raise tens
of billions of dollars by selling so-called preference shares.
Huarong in January reported a net profit of 10.07 billion yuan
($1.66 billion) in 2013, up 44.7% from a year earlier. It said its
purchases of bad assets increased dramatically last year. The
buying was roughly four times the total of its purchases between
2010 and 2012, though the company gave no precise figures.
Like Huarong and Cinda, other state-owned bad banks--China
Orient Asset Management Corp. and China Great Wall Asset Management
Corp.--are making efforts to become more market-oriented, expanding
beyond buying bad loans to operating brokerages, fund-management
companies and insurers.
Fiona Law contributed to this article.
Write to Enda Curran at enda.curran@wsj.com and Prudence Ho at
prudence.ho@wsj.com
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