Distressed funds seek to tap debt load in China
Potential for bad loans grows as corporate borrowing tops the US to reach US$14.2 trillion
Distressed-debt funds are raising cash to seek greater opportunities in China, where Standard & Poor's says corporate borrowing topped the United States last year.
Planned commitments to funds investing in Chinese and other Asian troubled assets were set to surpass US$2 billion this year, up from US$303 million last year, data from researcher Preqin showed.
Morningside Group Holdings in Hong Kong planned a US$103 million vehicle, Preqin said.
Guangzhou-based Shoreline Capital Management was seeking US$500 million for its third distressed-debt fund, co-founder Ben Fanger said.
China's economic growth had slowed to the least in more than a decade even as companies increased debt to US$14.2 trillion by December 31, surpassing the US$13.1 trillion in the US, an S&P report showed. Non-performing loans jumped the most since 2005 in the first quarter and state-owned asset management companies are raising funds to help clean up lenders' balance sheets.
"Now that China is facing slowing growth and the banks are selling bad loans, distressed opportunities have multiplied," said Fanger. "We have begun investing in [non-performing loans] again, as well as rescue and bridge financings."