Kohlberg Kravis Roberts (KKR), the US alternative asset specialist, has teamed up with two Chinese partners to target credit and distressed opportunities in the Chinese market.
The new partnership gives KKR a direct link to the Chinese real estate market, which is estimated to have more than $3 trillion of outstanding debt – around 16 percent of the total lending market in the country – comprising commercial bank loans, trust schemes and wealth management plans. The firm’s real estate group has traditionally pursued property-level equity, debt and special situations transactions.
The aim is to bring together COAMI and COS-Capital’s deal sourcing and asset management experience in China with KKR’s investment experience and network globally as well as in China to invest across alternative asset classes. As well as co-investing in deals, KKR, China Orient Asset Management (COAMI) and China Orient Summit Capital (COS-Capital) said they would also “explore strategic initiatives for broader collaboration”.
“We believe this partnership between a state-owned enterprise, a local investment manager and an international investment firm offers investors a rare opportunity to benefit from the best practices of all three parties,” said Guoxing Zhong, co-president at COAMI. The joint investment and asset management platform will also “focus on opportunities in China across a range of returns”.
COAMI is an international business platform owned by China Orient Asset Management Corporation (COAMC). Established by China’s Ministry of Finance in 1999, COAMC is one of four licenced national asset management companies and wholesalers of non-performing loans (NPLs) in China. It had RMB366 billion (€51 billion; $56 billion) in total assets in June last year.
COS-Capital, formed as a joint venture by COAMI and investment/project development specialist China Summit Capital in 2014, focuses on the management of dollar and renminbi investments, onshore mezzanine financing and cross-border investments.
Among Chinese commercial banks, NPLs amount to more than $180 billion according to the People’s Bank of China. KPMG says that the majority of the collateral underpinning the NPLs is real estate.