Huarong to offload 40b yuan in NPLs
China Huarong Asset Management plans to sell two batches of non-performing loans (NPLs) with a face value of about 20 billion yuan each to domestic and foreign investors in the near future, industry sources said yesterday.
The sales are in part to help Huarong meet a deadline to resolve by the end of next year all the non-performing loans it took over from the Industrial and Commercial Bank of China (ICBC) in 1999.No firm timetable has been set for the sales.
One of four state-owned asset management companies set up in 1999 to take over a combined 1.39 trillion yuan of impaired loans from the Big Four state banks, Huarong is inviting outside investors to take a 49 per cent stake in an asset disposal joint venture.
Huarong will retain a 51 per cent interest in the resolution vehicle, which will receive one batch of bad loans with a face value of 20 billion yuan transferred to Huarong's 16 provincial offices from ICBC, the nation's largest commercial bank, in 1999.
The loans are believed to effectively fall into the 'loss' category, the worst type of bank loans.
Huarong management earlier went on an international roadshow to attract foreign investors for the joint venture but is said to have met a cool reception due to the poor quality of the loans it will receive.
'It's like throwing money at Huarong,' an industry source said.
He dismissed the arrangement as a cover-up for Huarong's inability to meet its asset disposal target.
Analysts have long warned that resolution of the 1999 loans would become more difficult with time as the better quality loans have been sold or recovered.
However, the asset management companies are eager to meet the government deadline in order to avoid likely closure or merger on grounds of poor performances and to win the right to branch out into other related businesses.
Huarong is also planning outright sales of newer doubtful loans - those a notch better in quality than 'loss' loans - in Hebei and Fujian provinces with a face value of about 20 billion yuan. It bought the loans from ICBC during the bank's financial restructuring in June.
It is likely to divide the Hebei loans into six or seven smaller pools for sales to domestic and foreign investors, while the Fujian loans may be carved into three pools.
Huarong also acquired doubtful loans in Qinghai province from ICBC in June.
These loans are not part of the forthcoming sales.
