CHINA Huarong Asset Management Co. yesterday published a preliminary prospectus on the Hong Kong stock exchange website for an initial public offering (IPO) that could raise between US$2 billion and US$3 billion.

    The potential listing would make Huarong — China’s largest bad loan buyer by assets — the second such company to go public after China Cinda Asset Management Co. raised US$2.8 billion in a Hong Kong offering in December 2013.

    A listing application is the first step toward getting approval from the Hong Kong exchange for an IPO.

    The proposed deal could be one of the largest IPOs in Hong Kong during the third quarter. It also comes as the city has overtaken the United States this year as the world’s top venue for IPOs, riding a steady stream of multibillion-dollar brokerage listings.

    IPOs in Hong Kong raised US$17.2 billion in the first half of this year, beating the New York Stock Exchange’s US$13 billion, data provider Dealogic said.

    Established in 1999, Huarong is one of four large asset management firms in China that helped to resolve some 1.3 trillion yuan (US$208.4 billion) in bad debt at the country’s top four State-run commercial banks in the early part of this century’s first decade. Known as bad banks, the firms bought soured loans at a discount from China’s big State lenders.

    According to the preliminary prospectus, the firm reported a 23 percent rise in net profit to 10.7 billion yuan last year, driven by higher income from distressed debt assets.

    China’s cooling economic growth in recent years has fueled a surge in bad debt in the country’s banking system and other financial sectors, which makes bad banks such as Huarong and Cinda even more attractive to investors.(SD-Agencies)