(Yicai Global) April 13 -- China’s largest financial asset manager China Huarong Asset Management Co. aims to establish a CNY10 billion (USD1.6 billion) debt-equity swap merger and acquisition fund to help companies reduce leverage and resolve financial risks.
The fund will reduce leverage pursue purchases of securities to convert to equity, while also directly participating in listed company's private placements, said Wang Lihua, vice president of the Beijing-based firm at a routine press conference.
Compared with bank-led debt-to-equity swaps, Huarong’s biggest advantage is its neutrality, Wang said, adding that since these companies originally undertake policy-denominated debt swaps, they have experience in this area and can balance the relationship between different interests.
Wang Lihua also said that asset management firms will first find their own clients and win positive projects through the original policy debt-to-equity swap customers, then look for projects in existing resources. They will also look for private placements and find items on the market.
Huarong will look for projects involving leading enterprises positioned in cyclical industries and will set up special teams to find listed firms meeting requirements with positive development prospects. The company will help these companies to conduct private placement and repayments and reduce leverage. Huarong will also look for companies facing bankruptcy and restructuring to undertake debt-to-equity swaps.
"We also need to make exit arrangements during the process of debt-to-equity swaps and adopt market-based arrangements," Wang said.
Editor : William Clegg