Business / Companies

Oaktree on the hunt for more distressed assets

By Cai Xiao (China Daily) Updated: 2015-09-12 14:22

US alternative investment company says it's a 'long-term believer' in China's growth prospects

Global alternative investment company Oaktree Capital Management LP said on Friday that it would continue to seek distressed asset investments in China as it remains confident on its growth prospects.

"We are long-term believers in China and still very optimistic about the long-term performance of the country and its economy," said Howard Marks, chairman of Oaktree.

Marks said the stock market slump is not a fair indicator of the economic sentiment. Instead, investor sentiment played a role in the slump.

According to Marks, Oaktree is looking for distressed debt investments in China as it believes that some of them are currently underpriced.

"Nonperforming loans of Chinese lenders are surging. Some of these debts, that are backed by solid assets at a fair price, have potential for substantial returns," said Marks.

"We are optimistic that we can build up this business successfully in China with local partners."

The nonperforming loan balance of the 16 listed Chinese banks was about 800 billion yuan ($128 billion) at the end of June, up 181 billion yuan over the end of last year.

In November 2013, Oaktree inked a strategic cooperation agreement with China Cinda Asset Management Co Ltd, one of the country's four State-owned bad-debt management companies to invest in China's distressed debts and assets.

Oaktree concluded its first nonperforming loan investment in China in May this year. Though Marks declined to divulge the actual amount, he indicated that it was "substantial".

The company is also looking to be a part of the second round of the qualified domestic limited partnership program. The QDLP program allows high-net-worth Chinese individuals to invest in overseas markets via foreign funds. The first round of the program was held in 2013.

Oaktree, Winton Capital Management Ltd, Citadel Securities LLC, Och-Ziff Capital Management Group and Canyon Partners, and Man Group Plc were the six foreign funds that got the nod in the first round of the QDLP program and were permitted to raise $50 million in Chinese currency.

People close to the deal said they will finish raising funds under the $50 million quota "in the very near future".

"If we take a gradual, long-term and patient approach, the QDLP program can be successful."

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