BEIJING/SHANGHAI - Vulture funds cheering freer access to China’s $1.5 trillion in bad debt have flown straight into a knotty market complicated by coronavirus restrictions, at a time when similar curbs are serving up opportunities in easier, developed markets.
Distressed debt specialists - or vulture funds - have been calling for easier NPL access for years, attracted by Beijing’s determination to modernise the market as well as the expectation of a rise in soured loans as China’s economy slows. But on-the-ground efforts to take advantage of easier market access have been stymied by limits on travel imposed to stop the spread of a virus that was first reported in China at the end of last year and has since led to over 184,000 deaths worldwide.
Funds balk at the uncertainty of how long it takes to receive licences, or whether applications could be hindered by local unofficial licence quotas, Xu said. Colcord said CarVal is in discussions with Shanghai regulators regarding an application for a local AMC licence, but that the firm is “at the early stage of learning what a provincial AMC would be allowed to do”.Some funds have also been distracted by opportunities in better-known markets such as Europe and the United States where virus restrictions have seen companies struggle with forced closure and housebound customers.