Chinese regulators have appointed CICC and UBS as advisers as they move to consolidate their hold on Anbang Insurance and develop a process to unwind its investments, according to people with direct knowledge of the matter.
The conglomerate is being unwound after its founder, Wu Xiaohui, was sentenced to 18 years in jail on fraud and embezzlement charges. Mr Wu is expected to appeal his sentence, these people said.
Before Mr Wu’s arrest, Anbang controlled 58 companies directly or indirectly with Rmb2tn ($318bn) in assets, according to estimates from UBS. As well as New York hotels, its holdings included rescue financings of troubled European financial institutions, control of a South Korean insurer and substantial equity stakes in about 20 listed companies in China.
The assets have been divided into two groups: Anbang’s real-estate holdings and its financial holdings. The insurer’s offshore investments are likely to prove more of a headache than its stakes in publicly listed companies in China itself.
That is because Mr Wu paid far more than any other bidder as he built what was rather an investment holding company than a proper insurer. He funded his purchases more through the sale of wealth management products than bank loans.
For example, whether it was a Belgian financial institution or the Waldorf Astoria Hotel, Mr Wu paid at least 40 per cent more than any other interested party, these people added.
As easy monetary policies in most developed countries mean there are few local sales of distressed assets, the prospect of Anbang’s assets coming up for sale has already garnered broad interest from hedge funds and private equity firms, including Apollo, Blackstone, Cerberus, JC Flowers and KKR. But these potential buyers are looking for bargains, while the regulators wish to maximise proceeds.
In meetings with regulators, at least one Anbang executive noted that the extent of overpaying was such that it would be almost impossible to recoup the money spent — just as with Japanese purchases of trophy assets in the US in the 1980s. The process is therefore expected to be time-consuming.
Competition for the advisory slot was not intense as some competitors to CICC and UBS decided it would be more lucrative to advise bidders than regulators, these people said.
Meanwhile, conglomerate HNA, another company selling assets to raise cash, is in talks with potential buyers without the involvement of regulators. HNA is expected to announce the sale of several of its publicly listed holdings in coming weeks.
CICC and UBS declined to comment.
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