China Huarong Asset Management Co, one of China’s big four state asset management companies (AMC), is expecting a significant profit drop for the first half this year, it said in a profit warning yesterday.
China’s Ping An Bank Co., Ltd. announced that it will set up a subsidiary targeting to raise RMB10 billion (US$1.46 billion) before 2020 to focus on debt-to-equity swap deals, according to a security filing.
Great Wall Asset Management Co., Ltd., one of the big four Chinese state-owned asset management companies (AMC) tasked to manage the country’s bad debt, has brought in four strategic investors who will invest a total of RMB12.12 billion (US$1.78 billion) to acquire 15.78% of the Beijing-based firm.
As Chinese real estate developers feel the squeeze from tightened liquidity while Beijing manages financial risks, China’s home-builders have turned to asset-backed securities (ABS) to access much needed financing to live through the current credit drought.
Chinese rural commercial banks have seen increasing non-performing loan ratio and deteriorating asset qualities, as five out of six banks that were downgraded this year are rural commercial banks, according to market intelligence provider Tonghuashun.
Corporate bond defaults are rising in China, and the latest is a Beijing-based state-owned group that controls 1,177 subsidiaries and eight listed companies unable to pay principal of RMB205 million (US$30.45 million).
Due to increasing supply of Chinese banks’ non-performing loans, prices of these assets have decreased as much as 10% in the first half of this year.
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.
China’s tighter regulations on bad loan classification has sent one small regional bank’s non-performing loan (NPL) ratio up by 15.41%, just one of many examples on how the more stringent regulations are having on exposing the country’s huge pile of soured loans.
Guangdong Bureau of State Administration of Foreign Exchange has set up a pilot cross-border transfers of non-performing loans (NPL) program to allow banks, financial institutions and individuals to transfer NPLs through Guangdong Finance Assets Exchange Center.
Asset-backed securities (ABS) with underlying assets of credit card bad loans are on the rise in China, as 14 ABS backed by credit card bad loans totaling RMB4 billion (US$610 million) were issued from 2016 until the end of April 2018. A pilot program were introduced in 2016 to experiment this approach to manage credit card bad loans.
The People’s Bank of China (PBOC) announced a cut of the Chinese bank reserve ratio for the third time this year in an effort to ease tight capital conditions, but analysts say the move will only have a limited impact and expects more credit easing in the coming months.
China’s National Audit Office has found three major financial institutions illegally provided loans to unqualified industries and local governments, failing to put in place proper risk management and controls, according to its official website.
Chinese commercial banks reported much higher non-performing loans at the end of May, as the effect of tighter regulations on bad loan classification is gradually kicking in. Chinese banks reported non-performing loans of RMB1.9 trillion (US$293 billion), or a NPL ratio of 1.9%, at the end of May, according to data released by the China Banking and Insurance Regulatory Commission.
Chinese real estate developers are showing greater signs of distress, as companies cancel bond issuance deals and more defaults are expected to follow.
Shenzhen-listed company Hainan Haide Industry Co., Ltd. has announced plans to raise up to RMB5.5 billion (US$858 million) from not more than 10 investors to boost its asset management subsidiary, according to its security filing.
In its latest reconstruction moves, household appliances manufacturer Henan Xinfei Electric Co., Ltd., has auctioned its brand equities and fixed assets worth of millions of RMB to look for new investors.
China Cinda Asset Management Co., Ltd，one of China’s Big Four AMCs (Asset Management Company), 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.
DunAn Group, a Chinese precision manufacturing and equipment maker amidst a debt crisis with total outstanding debt of RMB45 billion (US$7 billion), has been aggressively selling assets to reduce debt level.
As China continues to deleverage its corporate sector and manage systemic financial risks, debt-to-equity swap deals are increasingly embraced by state-owned enterprises as an alternative method to reduce their leverage ratios.
China Energy Reserve And Chemicals Group (CERCG), a Chinese energy company, said one of its wholly-owned subsidiaries had failed to pay its US$350 million bond due to "the tightening credit conditions" in China, according to a security filing.
Since a pilot program to explore cross-border transfers of non-performing loans (NPL) was launched in Shenzhen in 2015, approximately RMB6.8 billion (US$1.06 billion) of NPL were transferred as of May 24 in an effort to attract foreign capital to help China better manage its growing pile of bad loans.
Victor Jong, Partner, Advisory Services, PwC, is based in Shanghai and has practiced in the insolvency and corporate reorganization field since 1994. He transferred to PwC’s Shanghai office in 2004 to develop the restructuring and insolvency practice in mainland China. He has advised on numerous debt restructurings, distressed investments, receiverships and liquidation assignments in the Greater China region.
After Lai Xiaomin, party secretary and chairman of China Huarong Asset Management Co., Ltd., was under investigation for Huarong’s financial backing of a private firm, the new Huarong chief Wang Zhanfeng is now launching an inspection on its more than 10,000 employees.
A year after Ping An Bank Co., Ltd. set up its bad loan asset management unit with more than 400 staff in late 2016, the bank reported that it had recovered non-performing assets of RMB9.53 billion (US$1.5 billion) in 2017, up 81.62% compared with the year before.
Shoreline Capital, one of the earliest investors focused on China’s distressed debt market, sees an growing number of Chinese property firms experiencing severe liquidity issues, which would provide new opportunities for distressed debt investors.
Hong Kong’s proximity to China has long been its stronger selling point. But according to a new Fitch Ratings report, it is having a bad influence on the city’s banking sector.
Non-performing loan (NPL) ratio of Chinese commercial banks rose to 1.75% in the first quarter from 1.74% at the end of 2017, marking the first hike since the fourth quarter of 2016.
Hong Kong-based private real estate investment firm Gaw Capital has teamed up with Shenzhen Paladin Asset Management, the investment arm of one of the largest Chinese property developers, Country Garden Group，to jointly launch a US$1 billion special situations fund to invest in distressed real estate projects in China, Gaw Capital confirms to China Money Network.
AVIC Capital Co., Ltd., a financial services provider controlled by the Aviation Industry Corporation of China, Ltd, announced that it will partner with one of the country’s Big Four state-owned asset managers China Great Wall Asset Management Co. and other financial institutions to set up a RMB10 billion (US$1.58 billion) local "bad bank" in Chengdu city.
China’s five largest state-owned banks have seen their bad loan ratio drop last year, as they followed government policies to improve credit quality and accelerate bad loan disposals.