To capture special situation investment opportunities, China Cinda Asset Management Co., Ltd. has set up a RMB10 billion (US$1.5 billion) fund to help clean up zombie companies in the country.
The fund, named Ningbo Meishan Bonded Area Cinda Runze Investment Partners, at the beginning of this year to focus on companies that have applied for bankruptcy, according to statements made by an China Cinda official in a press conference yesterday.
As of the end of June, the fund has invested more than RMB800 million and more projects are currently being reviewed, according to Chinese media reports quoting Chen Yanqing, assistant president of China Cinda.
"After entering the bankruptcy process, many distressed companies face difficulties with stakeholders including local governments, financial creditors, non-financial creditors, and employees," Chen told Chinese reporters at a press conference, "The difficulties include insufficient cash flow, unpaid taxes, wages and social security payments, which disrupt the normal bankruptcy procedure."
Chen added, these zombie companies mostly are in sectors including equipment manufacturing, steel, nonferrous metals, and logistics.
China Cinda saw its non-performing asset business grew 29.6% in 2017 to RMB135.5 billion (US$21 billion). Revenues from non-performing assets management expanded faster, up 41.2% year-on-year in 2017 to RMB45.3 billion (US$7 billion), according to its annual report.
The company is trying innovative ways to look for special situation investment opportunities. China Money Network has reported that Cinda used Alibaba’s auction platforms to auction its non-performing assets.