HONG KONG—China Huarong Asset Management Co. plans to start taking orders for its $2.5 billion Hong Kong initial public offering next week, in what could be one of the region's biggest listings this year and only the second so far by a mainland state-owned debt clearing agency.

Huarong, set up by Beijing in 1999 to help resolve bad debt at the country's top four state-run banks, began sounding out investors for its IPO on Monday. It plans to take orders from institutional investors on Oct. 15 and list on the Hong Kong stock exchange on Oct. 30, a person with direct knowledge of the deal said Monday. The deal is smaller than that of China Cinda Asset Management Co., which went public two years ago in a US$2.8 billion IPO but is now trading below its listing price.

The Beijing-based firm, its largest shareholder Ministry of Finance and Chinese state-owned food giant COFCO Corp. are planning to sell a combined 6.3 billion shares in the offering, the person said. Huarong last year sold a $2 billion stake to a group of investors—including COFCO, Goldman Sachs Group and Warburg Pincus. China's Ministry of Finance remains its controlling shareholder.

Huarong's potential listing would be the first major offering in the fourth quarter in Hong Kong. Should Huarong go public, it could become the third-largest IPO in Hong Kong this year after the $5 billion listing of China brokerage firm HTSC, or better known as Huatai Securities, and the $4.1 billion IPO by another securities firm, GF Securities Co., according to Dealgoic. Despite the quiet third quarter, Hong Kong has raised US$21 billion so far this year, making it the top global listing venue.

Huarong originally planned to list in September but delayed the deal due to volatile stock markets. The city's benchmark Hang Seng Index fell 20% in the third quarter on concerns of the slowdown in China's economy, but is up 6.6% in the past three trading days.

Two other top Chinese financial firms-- China International Capital Corp. and China Reinsurance (Group) Corp.—are also planning to take orders from investors this month for their respective Hong Kong IPOs, which together total $3 billion, other people familiar with the deal said earlier. CICC is China's top investment bank, while China Reinsurance is the country's biggest reinsurer.

Huarong was one of four large asset-management companies created to help resolve some 1.3 trillion yuan ($203 billion) of bad debt, using government-backed funds to buy the state-run banks' nonperforming loans. The four, including Cinda, have since moved to buying bad debt at other types of Chinese companies as well.

Proceeds from Huarong's IPO will go toward developing its distressed-assets management and investment business, according to its listing prospectus filed with the Hong Kong stock exchange. China International Capital Corp., Citigroup Inc., Goldman Sachs Group Inc., HSBC Holdings PLC and ICBC International are advising Huarong on its IPO.

Write to Yvonne Lee at yvonne.lee@wsj.com

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(END) Dow Jones Newswires

October 05, 2015 01:15 ET (05:15 GMT)

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