China’s CITIC Bank looks to sell $2.8b of Asian loan portfolio

Photo: Reuters

China CITIC Bank International, the offshore banking arm of conglomerate CITIC Group, is selling $2.8 billion of its Asian loan portfolio including financing it extended to ChemChina, Fosun International and China Evergrande Group, Thomson Reuters Basis Point reported on Wednesday.

The loan sale – representing about seven percent of the bank’s $39 billion offshore assets – comes as Chinese regulators move to reduce leverage and control potential systemic risk, including problems posed by domestic companies acquiring overseas assets.

Hong Kong based CITIC Bank International has put 51 Asia offshore loans up for sale, most of which were made to companies based in mainland China, Basis Point reported, citing people with direct knowledge of the matter and a sale document. The loans are largely denominated in U.S. and Hong Kong dollars, maturing between 2017 to 2021.

The largest loan up for sale is a $600 million chunk of a $12.7 billion syndicated financing facility backing China National Chemical Corp’s (ChemChina) $44 billion acquisition of pesticides and seeds group Syngenta AG, according the document and the sources, Basis Point said.

CITIC Bank International, together with its parent China CITIC Bank, was the global coordinator and largest lender of the facility.

The bank is also selling a HK$4 billion ($512 million) portion of a loan used to finance Hong Kong-listed Goldin Properties Holdings Ltd’s take-private, HK$2 billion of lending to debt-laden property developer China Evergrande Group and $30 million to acquisitive Chinese conglomerate Fosun, according to the document and sources.

Basis Point was not able to ascertain the reason for the sale but banks typically offload portfolios in the secondary market to reduce credit and liquidity risk. Bankers in receipt of the sale document said the $2.8 billion portfolio was unusually large for the Asian secondary loan market.

A Hong Kong-based spokesman for CITIC Bank International declined to comment.

Scaling Back

The Chinese banking regulator is cracking down following years of aggressive lending by Chinese banks, particularly to finance overseas acquisitions. Chinese firms spent a record $221 billion on assets overseas in 2016, ranging from movie studios to football clubs.

Chinese banks’ share of the Asia ex-Japan market in syndicated loans, usually used to fund acquisitions, was more than a third last year compared to about 14 percent in 2013, according to Thomson Reuters LPC data.

Last month, China’s banking regulator ordered a group of lenders to assess their exposure to offshore acquisitions by HNA Group, Dalian Wanda Group Co, Anbang Insurance Group, and Fosun, Reuters reported, without naming the banks.

Several Chinese loan bankers said they were also looking to deleverage their portfolio and would be selective in lending in the second half of 2017.

“We have been asked to tighten our lending in the second half after making so many loans in the past few years,” one Hong Kong-based senior loan banker told Basis Point.

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Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.