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  • Jul 31, 2014
  • Updated: 2:18pm

Cinda

Cinda was set up in the late 1990s to deal with an estimated 1.4 trillion yuan worth of bad assets amassed by mainland banks. It was expected to raise as much as US$3 billion through a Hong Kong listing in the fourth quarter of 2013.

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LISTINGS

Cinda to submit papers for Hong Kong IPO next month

With potential underwriters shortlisted and strategic investors already in place, sale of shares in debt-clearing agency to be swift

PUBLISHED : Monday, 12 August, 2013, 11:49am
UPDATED : Tuesday, 13 August, 2013, 10:01am

Cinda Asset Management, one of China's big four state-owned debt clearing agencies, is expected to apply for a Hong Kong listing next month, after a weekend "beauty parade" and talks with potential underwriters, according to bankers with direct knowledge of the deal.

The size of Cinda's initial public offering (IPO) has not been finalised. Bankers expected the Beijing-headquartered asset manager to raise US$2.5 billion to US$3 billion from a float that would happen in the last quarter of the year at the earliest.

Cinda, set up in the late 1990s to take over an estimated 1.4 trillion yuan of bad assets from mainland banks, has shortlisted Bank of America Merrill Lynch, Credit Suisse, Goldman Sachs and UBS as potential IPO underwriters.

"The preliminary investor base, financial forecasts and valuations will be ready in September," said a Beijing-based banker involved in the deal.

The equity raising will be swift, given that Cinda has already attracted pre-IPO investment from a consortium of foreign investors that includes UBS, Standard Chartered, Carlyle Group and Boyu Capital.

Boyu is a well-connected private-equity firm co-founded by former Ping An president Louis Cheung and Mary Ma, who served as a partner at TPG Capital and chief financial officer of Lenovo.

Jiang Zhicheng, the grandson of former president Jiang Zemin, is a Hong Kong-based partner in Boyu.

The South China Morning Post reported in March this year that Carlyle and Boyu had made indirect investments to take minority stakes in Cinda. Under a complex transaction with Hong Kong-based private equity firm Citic Capital, Boyu obtained part of Citic's Cinda stake.

In March last year, UBS, Standard Chartered, and Citic Capital paid 5.4 billion yuan for an 8.5 per cent stake in Cinda.

"The Cinda IPO could happen before the long-awaited listing of China Everbright Bank and Huishang Bank, both of which are under mounting capital pressures," said a Hong Kong banker.

Cinda holds better quality assets than the other three agencies. It is also the most profitable of the four. It has gained first-mover advantage in seeking an IPO, which should increase its valuation.

Analysts and fund managers agreed deteriorating asset quality in the mainland has emerged as credit expansion has caught up with slowing economic growth. This is a side effect of the four trillion yuan (HK$4.54 trillion at the time) stimulus at the end of 2008 that crowded out more productive investments.

The big-bang stimulus created overcapacity in several capital-intensive industries, especially those related to infrastructure.

This has generated more bad loans at banks, which may mean the government will intervene with bailouts in the future if some troubled industries deliver lacklustre social and economic returns.

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