A Chinese asset manager quietly adds some well-connected investors ahead of its IPO
If China’s Cinda Asset Management wanted to line up some influential stakeholders ahead of a planned $3 billion IPO, it couldn’t have done much better than quietly signing up one fund owned by the grandson of former Chinese Jiang Zemin and another stacked with former Western political leaders like George H.W. Bush.
The South China Morning Post broke news on Tuesday that Cinda, which sold a 10 percent stake to UBS, Citic Capital and Standard Chartered for about US$1 billion a year ago, has two new indirect investors: Boyu Capital, whose investors include Jiang Zhicheng and billionaire Hong Kong tycoon Li Ka-shing; and Carlyle Group, the US-based private equity group with a roster of heavyweight advisors. UBS sold part of its Cinda holdings to Carlyle, and Citic sold a partial stake to Boyu, sources told the SCMP.
Cinda was one of four companies formed in the late 1990s when China restructured its banking industry, with Cinda taking on the bad loans of China Construction Bank. It’s not entirely clear what became of the underperforming debt, and analysts suspect a large portion remains on Cinda’s books, in part because they wanted extremely high prices for the debts from foreign investors. That legacy has persisted, even as the firm has expanded into underwriting and bond sales. As Quartz’s Naomi Rovnick reported in 2010 for the SCMP:
The four asset management companies have a politically sensitive job. They have to sell the bad loans they acquired. But they do not want international firms to make too much profit from restructuring state-owned firms.
Cinda’s finances remain opaque. According to Reuters, the asset manager was profitable at the end of 2011. Whether or not it still holds impossible-to-sell bad loans is unclear. Chinese publication Caixin reported last June that Cinda was in line for a capital injection from the Chinese government ahead of its IPO. That may well have involved the Beijng government paying Cinda for its old bad debts, as happened with state-owned bank Agricultural Bank of China before its 2010 listing.
Nevertheless, Hong Kong retail investors will likely be more focused on the blue-chip credentials of Cinda’s new backers. Li Ka-Shing is well known as a “cornerstone” investor who the locals have nicknamed “Superman” for his moneymaking skills. They queue up to follow his financial decisions. And nothing conveys the tacit approval of China’s government like the presence of a princeling who calls the still-influential Jiang Zemin “grandpa.”
Additional reporting by Naomi Rovnick.
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