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FINANCE

Smaller Bad-Loan Specialists Get Squeezed

By Dong Jing and Dong Tongjian
Chinese banks' recent moves into the distressed-debt market is expected to squeeze the business of smaller so-called asset management companies, whose main business is buying and reselling such debt. Photo: Virtual China
Chinese banks' recent moves into the distressed-debt market is expected to squeeze the business of smaller so-called asset management companies, whose main business is buying and reselling such debt. Photo: Virtual China

Distressed debts in China are becoming more expensive these days.

Licensed bank-loan recovery specialists — commonly known in China as asset management companies (AMCs) — bid for portfolios from banks and provincial-level governments. The auction prices have jumped more than 50% since January, an executive from a provincial-level AMC said.

“When China Construction Bank sold asset packages at an auction the other day, Cinda’s bid price was 0.46 yuan (7.0 U.S. cents) per yuan of loans,” the executive said, referring to one of the four national AMCs. “But we only had a budget to pay 0.36 yuan (per yuan of loans), so we lost.”

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