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Bain makes first foray into China NPLs with $200 mln portfolio purchase: Reuters

Bain Capital said on Monday it has agreed to buy a portfolio of non-performing loans (NPLs) worth $200 million in principal from a Chinese asset manager, in what two people close to the matter said was the U.S. private equity firm’s first such deal in China.

Bain Capital Credit made the purchase as part of its special situations strategy in Asia, the company said in a statement.

The firm bought the portfolio of real estate-related loans – including loans linked to retail, hotel and industrial assets – from China Huarong Asset Management Co Ltd, China’s biggest distressed debt manager, one of the people said.

The people declined to be identified as details of the deal have not officially been made public. Bain and Huarong declined to comment.
ShoreVest Partners will act as master servicer for the portfolio, the U.S. private equity firm said, collecting funds and reporting on the loans on behalf of Bain.

NPLs at Chinese commercial banks reached 1.58 trillion yuan ($230.6 billion) at the end of March, from 1.51 trillion yuan at the end of 2016, China Banking Regulatory Commission (CBRC) data showed.

But the market for troubled debt, which includes NPLs as well as loans categorised as at risk, is much larger, making it an appealing target for global investors including KKR & Co LP and Oaktree Capital Group LLC, as well as niche firms such as Clearwater Capital Partners LLC that have flocked to China’s distressed debt assets in recent years.

Investors can pay as little as a few cents on the dollar for NPLs, depending on the category of debt they buy. Lost category loans can sell for 5-8 cents on the dollar or less, while doubtful category debt could fetch 20-40 cents. That means Bain may have spent as little as $10 million for the loans based on the value of previous transactions.

The deal comes as Bain looks to raise $1 billion in its first Asia-focused credit fund, Reuters reported in February.

The private equity firm has previously invested in the region in distressed debt and so-called special situations transactions through its global funds.