China in the Past 10 Years - its GDP, Export and Population
How Institutional Investors May Avoid Due Diligence Pitfalls in China

Fortress Investment Group Moving Into Chinese Bad Debts through D.B. Zwirn

According to Financial Times report on January 8, Fortress Investment Group is buying an asset management firm specialized in soured debts and distressed assets in China.  The firm's name is the Fan Ya Tai Asset Management (International) Ltd.

Fan Ya Tai's English website indicates that, "Fan Ya Tai Asset Management Company (International) Limited ("FYT"), is a PRC based commercial mortgage, commercial finance and residential mortgage special service consulting company. Majority shareholders are D.B.Zwirn funds managed by Fortress Investment Group(NYSE:FIG)." 

Its Chinese website says that the transfer of majority shares to D.B. Zwirn completed in December 2007. Starting from 2006, D.B. Zwirn's problems were disclosed, and in 2007 D.B. Zwirn was undergoing extensive investigations and audit. What is difficult to understand, why did Fan Ya Tai still went ahead and let D.B. Zwirn take the company over.

When Dan Zwirn started winding down his fund due to poor internal control in 2008 he transferred $2.8 billion of illiquid assets to an affiliate of Fortress Investment Group (FIG).  In this case, can we interpret that part of the overseas assets such as those of Fan Ya Tai were also folded under FIG.  If this is the case, FIG is only officially claiming its ownership of Fan Ya Tai this time, instead of buying it out. 

FIG is entering into a promising land of opportunities anticipating the surge of non-performing loans as a result of the stimulus program launched by the Chinese government to combat the financial crisis. The cooling down of China's economy and the government's interference of the real estate market caused the massive lending to end up as non-performing loans.  Unlike in late 90s, when banks' bad debts were mostly managed by the four government-run asset management companies, China Huarong, China Great Wall, China Orient and China Cinda, which, since 1999, have evolved into financial services/investment banks and plan to go public,  this round of cleaning-up may be left to privately-owned companies, including foreign players. 

 

Kee Global Advisors LLC (KGA) is a corporate development advisory firm, which assists companies with cross-border expansion between China and the U.S., access to growth capital and cross-border M&A. KGA also has extensive experience in helping financial technology companies restructuring/turnaround and business development with regard to alternative investment industry. Contact info@keeglobaladvisors.com for questions and assistance.