* Blackstone, Bain, sovereign wealth funds also in talks
* Huarong seeks to raise more than $2 bln -sources
* Bad debt manager eyes 15-20 pct stake sale before IPO
* Huarong 2013 net profit rose 45 pct on year to $1.67 bln
By Stephen Aldred and Denny Thomas
HONG KONG, Jan 24 KKR & Co and BlackRock
Inc are among leading global investors in talks to buy a
stake in China Huarong Asset Management Co Ltd as the bad debt
manager seeks to raise more than $2 billion, people familiar
with the matter told Reuters.
Other investors in the hunt include rival private equity
firms Blackstone Group and Bain Capital, the people
familiar with the matter said. Sovereign wealth funds from Asia
and the Middle East are also in a group of 20 or so investors
preparing to submit first-round offers by mid-February, they
Reuters previously reported that Huarong was planning to
sell a stake of between 15-20 percent to strategic investors
ahead of an eventual initial public offering.
Overseeing total assets of 400.9 billion yuan ($66 billion),
Huarong is the largest of China's four bad loan managers.
Huarong's planned stock offering will allow the company to
raise money to expand its business - acquiring bad loans and
forfeited assets from companies unable to repay their lenders.
Huarong turns a profit by repackaging the loans and assets and
selling them on.
As China's economy slows, a wave of loans is expected to
turn sour. That will boost prospects for Huarong and the three
other asset managers set up by the Chinese government in 1999 to
remove an estimated 1.4 trillion yuan ($230 billion) worth of
bad loans from the country's top four state lenders.
"NPLs (non-performing loans) will keep rising in absolute
terms and relative to the loan base (in ratio terms) from less
than 1 percent, which is low and unsustainable," said Grace Wu,
a Daiwa Capital markets analyst.
"China has a large enough buffer to absorb a three-four
times increase in NPLs. Some will argue that a lot of loans are
rolled over in what is called 'evergreen loans' but that's the
nature of lending in China," she added.
Huarong's fund-raising plans come on the heels of China
Cinda Asset Management Co Ltd's $2.9 billion Hong Kong
IPO in December. Cinda's stock has risen 43
percent above the offer price.
In an emailed statement late on Thursday, Huarong reported a
slower, but still strong increase in net profit in 2013. It said
it would be focusing its efforts this year on its planned share
The company, which has said it wants to list by 2016 at the
latest, said its net profit rose 45 percent to 10.07 billion
yuan ($1.67 billion) in 2013. A year earlier, it grew 65
Huarong was set up in 1999 to manage the non-performing
loans of Industrial and Commercial Bank of China Ltd
, the world's biggest bank by market value.
Controlled by China's finance ministry, Huarong was
restructured into a joint stock financial holding group in 2012
in preparation for its own listing. China Life Insurance Co Ltd
, the world's biggest insurer by market
value, owns 1.6 percent of Huarong.
Cinda's IPO attracted some of the biggest names in global
investing as cornerstone investors to provide a solid structure
for its IPO. They included Oaktree Capital Management Ltd
, the world's biggest distressed debt trader, and
Och-Ziff Capital Management Group LLC, who were among
the 10 cornerstone investors to jointly plough $1.1 billion into
Before the IPO, Cinda had raised $1.6 billion through a
stake sale to investors including China's National Social
Security Fund, Standard Chartered and UBS.
Blackstone, BlackRock, Bain and KKR declined to comment. A
Huarong official said the company has been talking with
investors, but has not selected any.
The sources declined to be identified as the process was