HONG KONG (Reuters) - Oaktree Capital Group LLC (OAK.N), the world’s largest distressed debt investor, is among a group of firms buying shares of China Cinda Asset Management Corp as part of its up to $2.5 billion initial public offering, sources said on Friday.
Cinda, one of China’s four bad loan managers, will also count hedge fund Och-Ziff Capital Management Group LLC (OZM.N), Ping An Insurance (601318.SS) and sovereign wealth fund Abu Dhabi Investment Authority as so-called cornerstone investors.
Cinda, along with its underwriters, had to turn down some bids on the cornerstone tranche as demand was so heavy, one source said.
Demand for the IPO is driven in part by the view that China’s financial system is set for an increase in non-performing loans as the economy slows, which increases the need for the services provided by Cinda and the other three bad debt management firms.
The offering is also set to provide a rare view into China’s financial system with investors keen to scan Cinda’s upcoming IPO prospectus for recovery rates on bad loans, its main holdings and the way in which it values billions of dollars in real estate.
Cornerstone investors in IPOs receive a guaranteed allocation in exchange for agreeing to retain their stakes for a set amount of time.
The final list of cornerstone investors may change, said the sources, who declined to identified as they were not authorized to speak publicly on the matter.
Oaktree declined to comment, while Och-Ziff, Ping An and ADIA could not be immediately reached for comment.
Cinda is set to launch the Hong Kong IPO on Monday and price the offer on December 4.
The shares will be offered at an indicative range of HK$3.00-$3.58 each, 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
Cinda is one of four asset management companies that Beijing established in 1999 to absorb toxic assets held by the China’s four biggest banks. It was set up to take on the bad loans at China Construction Bank, the country’s No. 2 lender.
Cinda is the most profitable and the first of the four bad loan managers to seek a public listing, with company disclosures showing large and steady growth of its operations.
It has stakes in a raft of companies obtained through debt-to-equity swaps, including holdings in Aluminum Corporation of China (Chalco) (2600.HK) (601600.SS) and China Gezhouba Group (600068.SS), the main construction firm in charge of the massive Three Gorges Dam project. It has property holdings worth at least 2.3 billion yuan, mostly seized from companies that failed to pay their loans.
Reporting by Denny Thomas and Fiona Lau of IFR. Additional reporting by Elzio Barreto; Editing by Michael Flaherty and Edwina Gibbs