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Agricultural Bank of China sets up private equity fund for debt-for-equity swaps

Agricultural Bank of China Ltd. set up a private equity fund that would raise money from outside investors to buy equity stakes acquired by the bank's asset management company in debt-for-equity swaps, China's Caixin reported Aug. 10.

The fund, ABC Capital Management Co. Ltd., was registered with a registered capital of 500 million yuan. It will operate as a unit of Agricultural Bank of China unit ABC Asset Management Co. Ltd. The fund will use money raised from outside investors to buy equity stakes taken by ABC Asset Management in debt-for-equity swaps, according to the report.

Analysts believe the fund was set up to overcome some of the obstacles that have held back major Chinese banks. The fund's assets will be kept separate from Agricultural Bank of China's other operations, and the assets, provisions and losses incurred will not have to be consolidated onto the balance sheet of the distressed debt unit, and hence the bank itself, analysts told Caixin.

As of Aug. 10, US$1 was equivalent to 6.85 Chinese yuan.