REFILE-UPDATE 1-Cinda prices biggest 2013 Asia-Pacific IPO at top, raising $2.5 bln
(Corrects typo in fifth paragraph)
* Retail tranche more than 160 times oversubscribed-source
* Global investors and Beijing support drive demand
* Interest swivels to China's other bad loan managers
HONG KONG, Dec 5 (Reuters) - China Cinda Asset Management Co Ltd has priced the Asia-Pacific region's biggest initial public offering this year at the top of its marketing range after rampant investor interest in a company that converts China's growing pile of bad loans into profits.
Backed by Hong Kong's army of mom and pop investors as well as marquee global fund managers, Cinda is set to raise $2.5 billion in a Dec. 12 debut that spotlights a growth opportunity even as China's economy cools. It could tempt the country's other three state-run bad debt managers, including Huarong Asset Management Corp, to go public sooner rather than later.
Coaxed by a retail tranche that was oversubscribed 160 times, Cinda priced the shares at the top of the offer's HK$3.00-3.58 range, people familiar with the matter said. Sources declined to be identified as the information is not public yet.
"With a good historic track record, good relationships, Ministry of Finance backing them with foreign players that they can work with, I don't see this as just a pile of junk that people are buying into," said Jimmy Weng, a portfolio manager at hedge fund Genesis Capital Investment.
Cinda's offering, the largest in the Asia-Pacific region since the $3.6 billion listing by People's Insurance Company (Group) of China (PICC) in November 2012, also provides a welcome boost for Hong Kong's IPO market.
Hong Kong has suffered a drop in IPO volumes in the last two years, but deals are picking up steam with financial offerings such as the up-to-$2.8 billion listing by mid-sized lender China Everbright Bank.
With Hong Kong brokerages predicting a trading pop of up to 10 percent when Cinda makes its debut, investor interest will swivel to Huarong, the next of China's bad loan asset managers expected to seek an IPO. Huarong hopes to raise up to $2 billion, Reuters reported in June, though no timetable has been set.
Beijing set up Cinda, Huarong, Great Wall Asset Management Corp and Orient Asset Management Corp some 14 years ago to buy up non-performing loans from its state-owned banks in preparation for the lenders' eventual listing. The Ministry of Finance will still control nearly 70 percent of Cinda after the IPO.
Global investors lapped up the deal. A group of 10, including Norway's sovereign wealth fund and hedge fund Och-Ziff Capital Management Group LLC, became cornerstone investors pledging to buy 45 percent of the shares for $1.1 billion.
Alvin Cheung, associate director at Prudential Brokerage, expects the shares to rise between 5-10 percent when they debut on Dec. 12, as both institutional and retail investors that couldn't get into the original deal jostle to buy them.
Robust appetite for the original $123 million retail tranche of the IPO defied expectations of some in the market who feared a lukewarm retail reception. Hong Kong's individual investors are more usually drawn to easy-to-understand businesses, unlike Cinda's complicated bad debt trading activities.
While recycling soured loans and seized assets into profits may be a more complex business than some, it can be lucrative. Cinda said in its IPO prospectus that profit attributable to equity holders jumped 36 percent in the six months to June to 4.06 billion yuan ($666 million) from a year earlier.
Cinda offered 5.32 billion shares in a range that was equivalent to a price-to-book ratio of 1.10 to 1.30 times for 2013. Chinese banks listed in Hong Kong trade at an average of 1.2 times trailing P/B, according to Thomson Reuters data.
The valuation was reasonable, Genesis' Weng said. "Outside of valuation I think more people are trying to get into the story because of the excitement that this is the company that will come in and reform the entire sector because it will lift the overhang of the banks."
Cinda's offering has an initial allocation of 5 percent for individual investors. But that can rise as high as 20 percent if over-subscription is 100 times or more, according to its prospectus, with shares being clawed back from the offering to institutions.
Retail investors take margin loans to buy into Hong Kong IPOs and place large orders to bolster chances of getting a better allocation. Hong Kong brokerage Phillip Securities alone had HK$13.2 billion in Cinda margin loans, enough to cover the retail tranche of the IPO nearly 14 times.
"This kind of company is very new to the market, you can't find any peers compared to Cinda. It's the only one going to be listed in Hong Kong (for now), so there's the novelty factor," said Jasper Chan, corporate finance officer at the brokerage. ($1 = 6.0924 Chinese yuan) ($1 = 7.7529 Hong Kong dollars) (Reporting by Elzio Barreto and Denny Thomas; Additional reporting by Fiona Lau of IFR and Nishant Kumar; Editing by Kenneth Maxwell)
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