Bank of China (BOC) is to sell off US$2bn in non-performing loans in a continuing effort to clean up its balance sheet, reported the Financial Times. UBS was appointed to auction the loans, believed to have been transferred from BOC's Hong Kong arm prior to the subsidiary's listing last year. Private equity investors and investment banks are expected to bid for two loan tranches worth US$1.4bn and US$600m.
Four years ago Morgan Stanley bought Chinese non-performing loans with a face value of Yn10.8bn, while a consortium led by Goldman Sachs took over management of Yn1.97bn of debts. Typically, investors pay less than 10 per cent of the face value of the loans in the hope of making a profit by recovering a higher portion. BOC and the other three big state-owned banks – China Construction Bank, Industrial and Commercial Bank of China and Agricultural Bank – are attempting to dispose of US$350bn-750bn-worth of problem loans to improve their financial health and clear the way for privatisation.
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