China Huarong Asset Management Co, the country’s biggest manager of bad debts, said on Tuesday it will sell up to 25 billion yuan ($3.64 billion) of bonds in the next week to replenish capital and fund the purchase of distressed assets.
The fundraising comes as Beijing accelerates efforts to reduce leverage as the number of defaults by both private and state companies has surged against the backdrop of a slowing economy.
Huarong, one of four state-owned asset management companies (AMCs) set up in 1999 to dispose of state lenders’ bad debts, will raise 12.5 billion via three-year financial bonds, and another 12.5 billion via five-year bonds, the company said in a statement on Shanghai Clearing House’s website.
The bonds will be issued on China‘s interbank market between Nov. 18 and Nov. 22. Terms will be decided based on the bidding.
At the end of June, non-performing loans (NPLs) at Chinese commercial lenders totaled 1.44 trillion yuan, the highest in 11 years.
The urgency of dealing with rising NPLs has not only increased the capital needs of companies such as Huarong, but also prodded Beijing to encourage the creation of more managers to handle bad loan.
In addition to the four national AMCs, there are also provincial ones. State media reported last month that China‘s banking regulator relaxed rules to allow provincial governments to set up two instead of one.