Hong Kong Stock Exchange

China Huarong IPO seeks US$2.8b in biggest Hong Kong listing so far this year

Firm plans to use most of the proceeds to expand its distressed debt business

PUBLISHED : Tuesday, 13 October, 2015, 1:23pm
UPDATED : Tuesday, 13 October, 2015, 9:02pm

China Huarong Asset Management’s initial public offering will seek to raise up US$2.8 billion, its indicative price range shows, marking the biggest Hong Kong listing in 10 months as investors venture back into equities after a market slump this year.

The second of China’s four biggest bad debt managers to list after China Cinda Asset Management raised US$2.8 billion in 2013, Huarong is likely to benefit from a recent 21.5 per cent surge in Cinda’s shares.

“Cinda has been on a tear the past few days, so that’s obviously very good,” a source familiar with the deal said.

Huarong and some of its shareholders plan to offer shares equivalent to 16.4 per cent of its enlarged share capital in an indicative range of HK$3.03 to HK$3.39 each, sources with direct knowledge of the plans said on Tuesday.

Huarong’s price range is equivalent to a forecast price-to-book ratio of 0.96 to 1.05 times for 2015, the sources said, compared with 0.9 times for Cinda.

Huarong’s deal is scheduled to be launched on Thursday, just days after an up to US$2 billion IPO from China Reinsurance (Group). The companies received approvals weeks ago but the deals were delayed due to a steep slide in mainland China equities as well as volatility in other global markets.

Huarong’s IPO would be the largest in Hong Kong since property developer Dalian Wanda Commercial Properties raised US$4 billion in December.

China’s bad debt management firms make money by buying soured loans from banks and other companies and then restructuring the debt or recovering cash from the borrowers. Huarong said it plans to use most of the proceeds from the IPO to expand its distressed debt business.

The Huarong IPO secured commitments worth about US$1.8 billion from around 12 to 13 cornerstone investors, the sources said. The final names on the list might change, but include real estate developer Sino-Ocean Land Holdings and utility State Grid Corp of China, with pledges of US$680 million and US$300 million respectively, one of the sources said.