July 13, 2017 / 7:29 AM / a month ago

CITIC Bank International looks to offload $2.8 billion loan portfolio: Basis Point

HONG KONG (Reuters) - China CITIC Bank International, the offshore banking arm of conglomerate CITIC Group, is selling $2.8 billion of its Asian loan portfolio including financing it extended to ChemChina, Fosun International and China Evergrande Group, Thomson Reuters Basis Point reported on Wednesday.

The loan sale - representing about 7 percent of the bank's $39 billion offshore assets - comes as Chinese regulators move to reduce leverage and control potential systemic risk, including problems posed by domestic companies acquiring overseas assets.

Hong Kong based CITIC Bank International has put 51 Asia offshore loans up for sale, most of which were made to companies based in mainland China, Basis Point reported, citing people with direct knowledge of the matter and a sale document. The loans are largely denominated in U.S. and Hong Kong dollars, maturing between 2017 to 2021.

The largest loan up for sale is a $600 million chunk of a $12.7 billion syndicated financing facility backing China National Chemical Corp’s (ChemChina) $44 billion acquisition of pesticides and seeds group Syngenta AG, according the document and the sources, Basis Point said.

CITIC Bank International, together with its parent China CITIC Bank, was the global coordinator and largest lender of the facility.

The bank is also selling a HK$4 billion ($512 million) portion of a loan used to finance Hong Kong-listed Goldin Properties Holdings Ltd's take-private, HK$2 billion of lending to debt-laden property developer China Evergrande Group and $30 million to acquisitive Chinese conglomerate Fosun, according to the document and sources.

Banks typically offload portfolios in the secondary market to reduce credit and liquidity risk. Bankers in receipt of the sale document said the $2.8 billion portfolio was unusually large for the Asian secondary loan market.

A Hong Kong-based spokesman for CITIC Bank International said in an email statement that the sale of the loans was part of the bank's ongoing portfolio management.

"The bank's liquidity maintenance ratio is well above regulatory requirements and is above peer average," he added.

SCALING BACK

The Chinese banking regulator is cracking down following years of aggressive lending by Chinese banks, particularly to finance overseas acquisitions. Chinese firms spent a record $221 billion on assets overseas in 2016, ranging from movie studios to football clubs.

Chinese banks' share of the Asia ex-Japan market in syndicated loans, usually used to fund acquisitions, was more than a third last year compared to about 14 percent in 2013, according to Thomson Reuters LPC data.

Last month, China's banking regulator ordered a group of lenders to assess their exposure to offshore acquisitions by HNA Group, Dalian Wanda Group Co, Anbang Insurance Group, and Fosun, Reuters reported, without naming the banks.

Several Chinese loan bankers said they were also looking to deleverage their portfolio and would be selective in lending in the second half of 2017.

"We have been asked to tighten our lending in the second half after making so many loans in the past few years," one Hong Kong-based senior loan banker told Basis Point.

Reporting by Carol Zhong of Thomson Reuters Basis Point. Additional reporting by Umesh Desai in Hong Kong; Editing by Michelle Price and Stephen Coates

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