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China Huarong IPO seeks US$2.8b; boost seen from Cinda share surge

[HONG KONG] China Huarong Asset Management Co Ltd's initial public offering will seek to raise up US$2.8 billion, its indicative price range shows, marking the biggest Hong Kong listing in 10 months as investors venture back into equities after a market slump this year.

The second of China's four biggest bad debt managers to list after China Cinda Asset Management Co Ltd raised US$2.8 billion in 2013, Huarong is likely to benefit from a 21.5 per cent surge in Cinda's shares over the past nine trading sessions. "Cinda has been on a tear the past few days, so that's obviously very good," said a source familiar with the deal.

Huarong and some of its shareholders plan to offer shares equivalent to 16.4 per cent of its enlarged share capital in an indicative range of HK$3.03 to HK$3.39 each, sources with direct knowledge of the plans said on Tuesday.

The sources declined to be identified as details of the deal have not been released to the public. Huarong did not immediately respond to a request for comment.

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Huarong's price range is equivalent to a forecast price-to-book ratio of 0.96 to 1.05 times for 2015, the sources said, compared with 0.9 times for Cinda.

Huarong's deal is slated to be launched on Thursday, just days after an up to US$2 billion IPO from China Reinsurance (Group). The companies received approvals weeks ago but the deals were delayed due to a steep slide in China equities as well as volatility in other global markets.

Huarong's IPO would be the largest in Hong Kong since property developer Dalian Wanda Commercial Properties Co Ltd raised $4 billion in December.

China's bad debt management firms make money by buying soured loans from banks and other companies and then restructuring the debt or recovering cash from the borrowers. Huarong said it plans to use most of the proceeds from the IPO to expand its distressed debt business.

The Huarong IPO secured commitments worth about $1.8 billion from around 12 to 13 cornerstone investors, the sources said. The final names on the list might change, but include real estate developer Sino-Ocean Land Holdings and utility State Grid Corp of China, with pledges of US$680 million and US$300 million respectively, one of the sources said.

Sino-Ocean and State Grid did not immediately respond to Reuters e-mailed requests for comment on the IPO.