Blue Ridge raises $1.45 billion for China private equity

HONG KONG (Reuters) - Private equity firm Blue Ridge has raised a $1.45 billion fund for investment in companies in China, as buyout firms target Asia at a time when a global credit crunch is hampering big deals in Europe and the United States. The fund, with an investment period of five years, will look to invest in areas such as energy, retail, real estate, technology and consumer products.

Justin Tang, co-founder of Blue Ridge China, said investors were increasingly keen on private equity in China because, unlike Western markets, it was not dependent on leveraged buyouts.

"In China, what we're mainly doing is investment in rapidly growing companies," Tang said in a telephone interview.

"The global dry-up of liquidity has only a limited impact on growth capital investment environment in China."

Blue Ridge China has spent most of a $300 million fund it raised in May 2006, including teaming up with Equity International to buy a stake in homebuilder Xinyuan Real Estate (XIN.N), which raised $245 million in a New York initial public offering last year.

A raft of government measures to cool the property market, including a clampdown on bank lending for construction, could throw up more investment opportunities, as developers seek capital to expand into national players.

"In the near term the investment environment is becoming difficult and I expect that to continue in the next 6 to 12 months," Tang said. "We expect the industry to go through consolidation and well capitalized companies will pull away."

With average home prices doubling since 2002 and high-end apartment prices rising much further, Beijing has tried to cool markets with curbs on supply and demand.

China has raised interest rates regularly, imposed taxes on capital gains and land appreciation, stopped non-residents buying apartments, told banks to curb loans to developers and employed a "use it or lose it" policy to deter land speculation.

The measures hit housing market transactions in some cities at the end of last year, including Guangzhou, Shanghai and Shenzhen. With many developers struggling to recycle money from apartment sales to finance new projects, analysts believe thousands could go bust.

Blue Ridge, which has invested in more than $7.5 billion worth of assets globally, is one of several global private equity investors targeting the fast growing economies of China and India.

On Tuesday, JPMorgan (JPM.N) said it had set up a new Asia private equity team to spend an initial $750 million.

Asia's loan markets grew fast last year, as bond markets clammed up, allowing funds run by the likes of Morgan Stanley (MS.N), Blackstone Group LP (BX.N) and Carlyle Group CYL.UL to ratchet up their investments.

But in a region where full-scale buyouts are often frowned upon and are difficult because families are still the main players in business, funds have had to settle mostly for taking minority stakes.

(Editing by Anne Marie Roantree)