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China Huarong Asset Management Company said Monday that it had found buyers or potential partners to take over the majority of the non-performing loans (NPLs) it put on the block at an international auction last week.
Citigroup, Goldman Sachs, UBS,Morgan Stanley and a bidding group led by JP Morgan, as well as a Chinese investment company have either won the right to purchase three portfolios, or will negotiate with Huarong to jointly dispose of a total of 14 other portfolios.
The 17 portfolios have an aggregate book value of 22.2 billion yuan (US$2.67 billion), or 89 percent of the total value of the NPLs Huarong put up for auction last Wednesday.
"We are satisfied with the results of the auction," Yang Kaisheng, president of Huarong, told reporters. "The success of the bidding demonstrates that China's NPL market has its vitality and attractiveness, and China's NPL problem can be solved through market-oriented means."
The 17 portfolios involve 1,084 enterprises located in 17 provinces or municipalities. But Yang declined to give a breakdown of the book value numbers, or disclose final prices.
Five other portfolios, with a total book value of 2.78 billion yuan (US$335 million), failed to find buyers, as no bid reached the seller's target price.
Yang said the international auction, the second by his company since its establishment in 1999, witnessed the highest level of bidding enthusiasm so far among all NPL auctions in Asia. Eleven investors, including one Chinese company, submitted bids.
"That reflects foreign investors' confidence in the Chinese economy and the country's investment environment," Yang said. "And it reflects their recognition of Huarong as a good partner."
Yang dismissed some foreign media reports that his company was dumping its worst assets onto foreign investors. "Some of the bids have reached our target prices," he said, "I think that explains something."
Of the 22 portfolios in the auction, the highest targeted recovery ratio stood at 30.4 per cent, which compares to the around 20 per cent average of all NPLs disposed of by China's four asset management companies. The lowest target was 5.7 per cent.
Yang also refuted worries that asset management companies have been selling State-assets at undervalued prices, arguing that his firm had carried out its investigations with all due diligence and determined that "the recovery ratio targets are appropriate."
"We did investigations for every portfolio, and we carefully appraised and analysed every portfolio," he said.
Ernst&Young acted as the financial adviser and appraised every single portfolio, which Yang said provided an important reference in judging if the bids were appropriate.
(China Daily December 23, 2003)
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