Chinese Banks Not Interested in Debt for Equity Swap; Bad Debt Firms Circle

Bloomberg: China's Large Banks Wary on Li Keqiang's Plan for Bad Loans
Asked about the plan at the Boao Forum last week, China Construction Bank Corp. Chairman Wang Hongzhang said he needs to think of his shareholders and wouldn’t want to see a plan that simply converted "bad debt into bad equity."

China Citic Bank Corp.’s Vice President Sun Deshun said at a press conference last week that any compulsory conversion of debt into equity would have to be capped. And Bank of China Ltd. Chairman Tian Guoli said in Boao that it’s "hard to evaluate" how effective debt-equity swaps will be, as so much has changed in China since the tool was used to bail out the banking system during a previous crisis in the late 1990s.
The bad debt firms are the better choice:
One big difference with the previous bailouts of 1999 and 2004 is the fact that many of the banks, SOEs and the asset-management companies have since sold their shares, in many cases to international investors, and now have to take shareholder interests into account, says Guangfa’s Mu.

...While banks are hesitant, China Huarong Asset Management Co., one of the four bad-loan managers that took part in the 1999 bailout and swaps, is actively pitching for a role in any new round of debt-equity conversion. The government should provide 1 trillion yuan to 3 trillion yuan of funding support, with banks, SOEs and asset managers sharing the risks, Lai Xiaomin, chairman of Huarong, said in a proposal to the top legislature earlier this month.

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