Agricultural Bank of China (ABC) – one of the country’s ‘big four’ state-run banks – plans to launch a private equity fund to support Beijing’s intensifying debt-for-equity swap program with state-owned enterprises.
The fund, ABC Capital Management was registered with starting capital of Rmb 500 million ($73.3 million), according to Caixin, and is a wholly owned subsidiary of the bank’s recently established asset management branch (AMC). Equity bought by AMC will then be exchanged with state-owned companies in swaps.
China’s five largest lenders have all set up asset management arms to assist the easing of corporate debt ratios of state-owned enterprises through the swap program. ABC is the first to set up a fund for this purpose.
The government program is yet to gain significant momentum. Since its inception in summer 2016, 109 firms have signed up to the program, and only seven signing swap arrangements in the first half of this year. According to the National Development and Reform Commission, only Rmb 150 billion of debt have been turned into equity under the program.