China Huarong raises $2.3bln in Hong Kong IPO-IFR

(Reuters) State-owned China Huarong Asset Management Co has raised HK$17.8 billion ($2.3 billion) through an initial public offering in Hong Kong after pricing the deal near the bottom of a marketing range, IFR reported late on Thursday.

China Huarong, China’s largest distressed debt manager, priced the IPO at HK$3.09 a share after marketing it in the HK$3.03-HK$3.39 each range, said IFR, a Thomson Reuters publication, citing sources close to the deal.

The bad debt manager becomes the second major Hong Kong IPO in recent weeks where more than half the offer was filled by commitments from Chinese state-linked entities. About 70 percent of China Huarong’s offer went to cornerstone investors, while 55 percent of China Reinsurance’s (Group) $2 billion IPO was taken-up by such investors.

Cornerstone investors are unique to Hong Kong and underwriters rely on them to draw other institutions and retail investors to the deal.

Usually, about 20-25 percent of most Hong Kong IPOs are pre-sold to the so-called cornerstone investors, but the higher-than-average reliance on cornerstone investors in China Huarong and China Re underscores the weak investor appetite for new offers, bankers and fund manages said.

Cornerstone investors are also barred from selling their shares for six months, resulting in lower liquidity when the stocks starts trading.

One hedge fund manager, who did not buy China Huarong shares, said investors were still very cautious about buying IPOs and avoiding deals that are perceived to be expensive.

The bad-debt manager had offered 5.77 billion new shares, or 15 percent of the enlarged equity capital in the IPO. The final offer price represents a 2015 full-year forecast price-book-ratio of 0.97, the report said.

China Cinda Asset Management Corp, the nation’s second-biggest bad debt manager, trades at a 12-month forward price-book ratio of 0.8, according to Thomson Reuters data. It raised $2.5 billion through an Hong Kong IPO in 2013.

China Huarong was not immediately available for comment.

CICC, Citigroup, Goldman Sachs, ICBC International, and HSBC are joint sponsors on the Huarong IPO.