China’s largest distressed-debt manager is preparing to auction off a portfolio of non-performing loans and other assets worth a combined 50 billion yuan ($7.5 billion) as the nation grapples with a wave of corporate defaults..
China Huarong Asset Management Co., which is backed by the government, plans to sell the assets in batches starting next month, according to people familiar with the matter. The move is part of the company’s efforts to reduce its exposure to bad loans and improve its financial health..
The assets up for auction include loans to property developers, manufacturers and other companies that have struggled to repay their debts. Huarong has been actively working to dispose of non-performing loans in recent months, and the upcoming auction is expected to be one of its largest sales of distressed assets..
The auction comes as China’s economy faces headwinds from a slowing property market, rising inflation and the ongoing Covid-19 pandemic. The government has been urging banks to lend more to businesses, but many are reluctant to do so given the high level of corporate debt..
As a result, distressed assets have been piling up on the balance sheets of Chinese banks. Huarong’s auction is seen as a way to help reduce this burden and free up capital for new lending..
Huarong is one of four state-owned asset management companies that were set up to buy bad loans from banks. The company has been struggling in recent years, and its financial health has come under scrutiny..
In March, Huarong missed a deadline to publish its 2021 financial results, and its shares were suspended from trading in Shanghai. The company later said that it had discovered accounting irregularities and needed more time to complete its audit..
The upcoming auction is expected to attract interest from a wide range of investors, including asset managers, private equity firms and hedge funds. The assets are likely to be sold at a discount to their face value, but the exact prices will depend on the level of demand..
The auction is a sign of the challenges facing China’s financial system. The government is trying to reduce corporate debt and improve the financial health of banks, but it is a difficult task. The upcoming auction is a step in the right direction, but it is unlikely to solve all of the problems facing China’s financial system..
