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QINGDAO TODAY
在线翻译:
szdaily -> Markets -> 
Foreign buying rises in bad debt market
    2018-11-13  08:53    Shenzhen Daily

FOREIGN investors are increasing their presence in China’s distressed debt market and the timing for them couldn’t be better as tight funding conditions onshore keep local buyers at bay.

International buyers purchased at least 12 nonperforming loan (NPL) portfolios this year, up from nine last year, according to a report by PricewaterhouseCoopers. Special situation funds from Oaktree Capital Group LLC and Bain Capital Credit have boosted activities in sourcing deals while DAC Financial Management, a foreign-owned NPL service provider in China, counts this quarter as one of the busiest it has had.

Driven by a slowing economy and regulatory push for banks to recognize bad loans, distressed debt piled up in China to US$1.4 trillion as of June 30, the biggest in the world, according to PwC estimates. A government clampdown on making risky bets in financial markets has choked funding for local players, creating a perfect backdrop for foreign investors to increase their footprint.

“We have been fielding many calls from foreign investors looking for assistance with sourcing and servicing,” said Phil Groves, president and founder of DAC Financial Management. “This will be our busiest fourth quarter in many years.”

With attractive pricing and more supply coming to the market, most foreign investors are upbeat on investing prospects for the coming year. Bain Capital Credit (Asia) LLC, for instance, plans to expand the size of its team on the mainland and spending more time marketing and meeting local asset management companies, which typically sell NPLs, said Kei Chua, managing director at the firm.

Oaktree is the most active investor in China’s bad debt, it has secured six NPL portfolios in the country since 2015, leading a deal league table maintained by PwC. The world’s biggest distressed-debt manager acquired 2.4 billion yuan (US$346 million) in soured loans from the eastern province of Jiangsu.

Foreign buyers started to dominate China’s NPL market by investment amount from late last year, and now account for at least 70 percent of the total market share, according to Wu Yonghui, director at the Guangzhou unit of Suiyong Rongxin Asset Management Co.

Sliding demand from local investors has pushed down overall pricing on NPLs this year, particularly in China’s less developed areas, said Zheng Hualing, president at DCL Investments, a local alternative asset management firm. (SD-Agencies)

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