Recall Resolution Trust Corporation? Long gone. Or Equitas, the vehicle created to rescue Lloyd’s of London, the insurer? Swallowed by Warren Buffett’s reinsurance business. Politically engineered bad-bank vehicles usually do what they can, then disappear. The IPO of Cinda, by trying to show that bad banks can make good, is different.
Cinda was set up in the 1990s, as one of four asset managers, to buy the bad debt of China’s banks. These days distressed debt is not all that Cinda does – a quarter of its profits come from other financial services. But bad debt is still the bulk of its business and where more than half the IPO proceeds will be invested. It wants to raise up to $3bn for 15 per cent of the enlarged share capital.
The prospectus has plenty to look at. Three-fifths of Cinda’s distressed debt is in property – it doubles down by lending to developers – while it also owns parts of China’s troubled coal industry following debt-for-equity swaps.