AGRICULTURAL Bank of China Ltd. (AgBank), China’s third-biggest lender, plans to sell a record 3.06 billion yuan (US$464 million) worth of bad loan-backed securities this week under a government pilot scheme to quickly liquidate soured debt.

    China’s third sale of securities backed by nonperforming loans (NPLs) since 2008 involves 10.7 billion yuan in troubled loans packaged as underlying assets.

    The assets include 1,199 secured loans to 204 borrowers operating in industries mainly including wholesale, manufacturing, real estate and transportation, the bank said.

    AgBank will sell 2.06 billion yuan in a triple-A-rated senior tranche and 1 billion yuan in an unrated subprime tranche. Payments from the troubled loans would service these securities.

    “Different banks have different asset portfolios and hence different types of NPL assets including credit cards, consumer loans, corporate and micro loans,” said analyst Elaine Ng at Moody’s Investors Service. “It will be good for AgBank market diversity if there are more NPL securitization from different banks.”

    Earlier this year, the government allowed six large lenders to issue a maximum of 50 billion yuan worth of asset-backed securities (ABS) with nonperforming loans as underlying assets, adding a new way for the banks to offload bad debt, Reuters reported in February, citing people close to the matter.

    The six were AgBank, Industrial and Commercial Bank of China, China Construction Bank, Bank of China, Bank of Communications and China Merchants Bank. (SD-Agencies)