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Non-performing loans (NPLs)

Overview

While the problem of China's non-performing loans (“NPL”) is well-known, understanding what to do to find the hidden value in pricing or servicing such loans is less so. Whether you need help managing portfolio sales, loan portfolio due diligence, valuation and pricing, transaction structuring or post deal loan servicing, we’re on hand to help you make informed decisions and maximise value.

When it comes to NPL issues, PwC is one of the leading firms in China with the experience to help you with the loan recovery process. Our people have been working on NPL assignments in China since 2000. The depth and breadth of our experience gives us unique insights into the loan valuation process that really help when it comes to portfolio evaluations and pricing discussions.

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Potential issues

As a buyer:

  • You’re looking for investment opportunities.
  • You need an independent review and valuation of your target loan portfolio.
  • You need advice on deal structures.
  • You want to be more certain about the accounting and tax implications of potential deal structures.
  • You want to engage a project manager with the right expertise to manage the execution of the deal.
  • You want to engage an expert to manage the subsequent loan collection process.

As a seller:

  • You want to advertise your portfolio for sale in a more effective way to maximise its potential value.
  • You are looking for potential investors.
  • You want to engage a project manager with the right expertise to manage the execution of the deal.

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Support

Buy-side services

  • We offer a full suite of advisory services that can be tailored to meet your requirements in China:
  • Identify potential investment opportunities.
  • Conduct loan portfolio due diligence and valuation.
  • Participate in roll-up (loan-by-loan recovery assessment) meetings.
  • Advise on potential deal structures for proposed transactions to mitigate potential risks.
  • Identify accounting and tax implications of potential deal structures and advise on plans to minimise costs.
  • Assist in the deal completion process, including assistance in securing requisite government approval.

Sell-side services

  • We can act as the lead financial adviser in relation to all facets of non-performing loan sales, including complete management of the disposal process.

 

Our services throughout the NPL cycle

Preparation for sale

  • Review, classify and stratify portfolio.
  • Pool and package sub-portfolios to maximise their potential value.
  • Advise on the right investor review files, including file content and information collation and organisation.
  • Advise on the right marketing and disposal strategies.
  • Prepare confidential information memorandum.

Investor sourcing

  • Identify potential investors for bilateral deals or public tenders.
  • Target specialist investors for specific sub-portfolios/tranches.

Execution / completion of sale

  • Manage the entire portfolio sales process.
  • Structure transactions.
  • Design appropriate bidding and sales procedures.
  • Oversee investor contact, including investor invitation and investor qualification.
  • Evaluate investment proposals.
  • Negotiate detailed terms.
  • Coordinate the involvement of legal and other advisers.

Post-deal services – loan portfolio recovery assessment and management

  • Manage the loan collection process.
  • Advise on loan servicing set-up issues.
  • Advise on issues that impact the collection process.

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Our experience

A domestic joint-stock commercial bank group

  • Review of a portfolio of distressed corporate loans and recovery analysis.
  • Portfolio size: US$1.7 billion (more than 200 loans).

China Orient AMC

  • Sell-side financial adviser on China’s first ever non-performing loan portfolio sale.
  • Portfolio size: US$225 million.

Cinda AMC Qingdao/Tianjin Auctions

  • Buy-side due diligence and advisory services.
  • Portfolio sizes: US$845 million and US$610 million.

Foreign/domestic NPL investor group

  • Transaction sourcing, structuring, closing assistance and post-deal loan services.
  • Portfolio size: US$225 million.

A domestic financial institution

  • Review of loans and recovery assessment.
  •  Portfolio size: US$6.0 billion.

Great Wall AMC

  • Buy-side advisory and due diligence in relation to a negotiated portfolio sale.
  •  Portfolio size: US$415 million.

China Construction Bank

  •  Buy-side due diligence services to multiple bidders in an asset auction.
  • Portfolio size: US$500 million.

Huarong I Auction

  • Buy-side due diligence and advisory services.
  • Portfolio size: US$365 million.

Huarong II Auction

  •  Buy-side due diligence and advisory services to multiple bidders.
  • Portfolio size: US$2.8 billion.

China Orient AMC

  •  Vendor due diligence and valuation on eight non-performing loan portfolios.
  • Portfolio size: US$3.9 billion.

China Orient AMC

  • Loan servicing manager for investor group.
  • Portfolio size: US$225 million.

A Big Four commercial bank in China

  • Sell-side financial adviser in relation to portfolio sale by auction.
  • Portfolio size: US$814 million.

Cinda AMC

  • Buy-side due diligence services in relation to a negotiated portfolio sale.
  •  Portfolio size: US$235 million.

ICBC Ningbo Branch

  •  Due diligence contractor in relation to securitisation of non-performing loan portfolio.
  •  Portfolio size: US$340 million.

 

 

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Contact us

Victor Jong

Victor Jong

Mainland China and Hong Kong Restructuring & Insolvency Leader, PwC Hong Kong

Tel: +[852] 2289 5010

Tim Guo

Tim Guo

Partner, PwC China

Tel: +[86] (21) 2323 2610

Christopher So

Christopher So

Partner, PwC China

Tel: +[852] 2289 2577

Chen Lau

Chen Lau

Partner, PwC China

Tel: +[86] (10) 6533 2208

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