AGRICULTURAL Bank of China (AgBank) will set up a wholly owned asset management division to undertake debt-for-equity swaps, the country’s third-biggest bank by assets said in a statement yesterday.

    The subsidiary — ABC Asset Management Co. — will have registered capital of 10 billion yuan (US$1.45 billion).

    It will buy up debts, convert debt into equity, as well as hold, manage and dispose of equity in debt-for-equity swap enterprises, AgBank said.

    AgBank’s move comes after the State Council, or Cabinet, published guidelines in October for reducing corporate debt by encouraging debt-for-equity swaps, as well as mergers and acquisitions, bankruptcies and debt securitization.

    Government officials have said the swaps are not a “free lunch” for troubled companies and that the deals would be used mainly to help high-quality firms that face temporary difficulties.

    China Construction Bank (CCB), the country’s second-biggest bank, already has announced seven debt-reduction deals with a total value of 83 billion yuan since October.

    CCB has also started talks with foreign investors to take part in a handful of recently announced debt-for-equity swap deals, Zhang Minghe, head of CCB’s debt-for-equity work team and deputy general manager of credit approval department, said Tuesday.

    CCB is working with advisory services firms to get in touch with interested potential investors, he said. (SD-Agencies)