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Debt-Equity Swaps in Full Swing
The non-performing assets of China's four State-owned commercial banks have been successfully transferred to either of four asset management companies (AMC).
But what of their disposition?
"Our first stage of work will soon end in success. Ninety per cent of the planned purchases have been completed,'' Yang Kaisheng, president of Huarong AMC, told Business Weekly.
Huarong reports 90 per cent of the enterprises recommended to it have been evaluated; 68.4 per cent of them have signed formal debt-equity swap contracts with Huarong, he said.
"We will complete all the debt-to-equity swaps before the end of June,'' he said.
According to an earlier report, Huarong will reportedly purchase 350 billion yuan (US$42.2 billion) of non-performing assets from the Industrial and Commercial Bank of China.
The China Great Wall AMC, which is responsible for dealing with the Agricultural Bank of China's non-performing assets, will also complete its assumption work soon, according to company President Wang Xingyi.
Now, Huarong has begun disposing of the assets. It recently successfully auctioned a mortgage in Guangzhou.
"We will start with the easier methods first such as auctions to dispose of the assets,'' said Yang.
There are also other ways to manage these assets including assets and enterprise restructuring, creditor's rights and stakes transfers, debt recollections, bankruptcies clearing and assets securitization.
Since the aim of any AMC is to revive as many State assets as possible, Yang said bankruptcies and securitizations are not the best methods and will not be used frequently.
Auctions, credit and stakes transfers, and assets and enterprise restructuring will be the major solutions, he said.
He was echoed by Wang who told Business Weekly that Great Wall will not dispose of assets lightly out of concern for the firms' investors.
"We must create the biggest profit for investors through assets and enterprise restructuring,'' Wang said.
Great Wall will also create other methods within the policy domain to dispose of assets to meet investors' needs, he said.
Both AMCs welcome the participation of foreign investors in disposing of non-performing assets.
"This may be the easiest, cheapest and most efficient way for foreign investors to enter certain fields in the Chinese market,'' said Yang.
"We will not only create smooth investment channels and a sound investment environment for foreign investors, but will provide all-round services in terms of investment, financing and legal services,'' Great Wall's Wang told Business Weekly.
At the moment, Huarong holds creditor's rights or stakes in at least 60,000 enterprises nationwide, covering almost all industries and areas. Many of them engage in large-scale operations, have big market shares, equipment, and talent staffers.
"Compared with setting up joint ventures, buying stakes or credits in these enterprises will be easier for foreign investors,'' said Yang.
Great Wall's assets management activities have spread to almost all industrial categories and into remote corners of the country.
Under its management domain, there are many small enterprises that need money only to flourish, said Wang Xingyi.
"Foreign investors are welcomed to enter all industries except for those concerning State safety or receiving State priority,'' said Yang. "They can also control an enterprise if policy permits.''
After China joins the World Trade Organization, it will open more fields and grant national treatment to foreign investors, which will greatly stimulate an influx of foreign investment, he said.
Huarong has fully communicated with major multinationals and investment bankers concerning available investment opportunities.
Quite a number of them have expressed an interest and are talking with Huarong about possible deals. Some international accounting firms are also watching China's assets disposal market and have expressed a willingness to act as intermediaries in attracting foreign investors, said Yang.
Many overseas investing institutions have also showed a great interest in purchasing Great Wall's assets, said Wang.
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