Established in 1999, Huarong is one of four national asset management companies created to dispose of a massive volume of nonperforming assets held by China’s big state banks. Their job is buying up distressed debt and trying to recoup as much money as possible by selling or restructuring the assets, or applying other methods of recovering the debt.
Huarong to sell $59bn of bad assets in revitalization push
Scandal-ridden debt manager secures lifeline led by state-owned Citic
QUAN YUE and DENISE JIA, CaixinSeptember 17, 2021 00:55 JST
China Huarong Asset Management is putting 380 billion yuan ($58.8 billion) of bad assets up for sale after the scandal-plagued bad-debt manager reported a record loss last year.
Huarong secured a long-expected rescue plan last month led by state-owned giant Citic Group, China’s second-largest financial holding company.
Citic is wholly owned by the State Council, the country’s cabinet. The sale of bad assets reflects Huarong’s determination to speed up revitalization and restructuring of its idle assets and distressed subsidiaries.
The marketing of the bad assets will mainly use online channels, with the company increasing marketing through its official website, livestreaming, offline promotion and a micro program, Huarong said in a statement.
The bad assets involve more than 7,000 borrowers in real estate, manufacturing, mining and other industries, and the collateral includes shopping malls, hotels, residential properties, businesses and mining rights, Huarong said.
Among the assets are machines and transportation equipment, receivables, financial collateral, current assets, intangible assets and real estate, Huarong said. The mining and exploration rights are worth about 12.46 billion yuan, involving 73 borrowers. Real estate assets involve 3,721 debtors, land rights 1,352 and projects under construction 204.
The assets for sale do not include the stalled Jeju Island tourism project in South Korea, in which Huarong invested $3.4 billion, indicating the company might have other plans for the project.
Huarong last month reported long-delayed 2020 results, posting a record 102.9 billion yuan loss while citing the impact of a review of assets and risks and the COVID-19 pandemic. It reported that shareholder equity fell nearly 85%.
Current estimates put the size of the capital injection Huarong needs at around 100 billion yuan. Citic will provide the lion’s share of the funds — between 20 billion yuan and 50 billion yuan — most likely raised through bond issuance, sources told Caixin.
Han Wei contributed to this report.