Bad debt company seeking capital injection

China Great Wall Asset Management Co Ltd is awaiting regulatory approval for the introduction of four strategic investors with total investment of 12.12 billion yuan ($1.79 billion).

The strategic investors include China Life Insurance (Group) Co, a previous shareholder in China Great Wall. China Life is planning to increase its investment by 121 million yuan, and the proportion of increased capital contribution will be the same as the insurer's current shareholding ratio in the State-owned asset management company. The other three investors are National Council for Social Security Fund (7 billion yuan), China Property & Casualty Reinsurance Co Ltd (2.8 billion yuan), and China Continent Property & Casualty Insurance Co Ltd (2.2 billion yuan).

"The funds will be used for capital replenishment and the improvement of our company's capability to operate nonperforming assets," Shi Jian, secretary of the board of China Great Wall, said on Thursday.

"Our strategic investors are optimistic about the prospect of growth in the nonperforming asset market," he added.

As of the end of May, the balance of nonperforming loans at commercial banks hit 1.9 trillion yuan, up from 1.7 trillion yuan at the end of 2017, according to the China Banking and Insurance Regulatory Commission.

Apart from the growth in nonperforming loans, the gradual expansion of liquidity risk exposure at non-financial companies and defaults on private placement bonds and credit bonds will also increase the supply of problematic assets, Shi said.

Speaking of the company's plan for an initial public offering, Zhou Liyao, president of China Great Wall, said: "We will create more favorable conditions for the listing of China Great Wall and seek the best time and place for our IPO." This year, the company plans to invest 120 billion yuan in the acquisition of nonperforming assets and also plans to dispose of NPAs worth 100 billion yuan, Zhou said.

China Great Wall will help listed companies mitigate potential default risks and carry out industrial upgrading through multiple measures including restructuring of debt, assets and equity. Since the beginning of 2018, the asset manager has formulated debt restructuring plans for more than 10 listed companies.