Fund for State-Owned Enterprise Restructuring to Raise USD19 Billion in Funding Round
Yicai Global
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Fund for State-Owned Enterprise Restructuring to Raise USD19 Billion in Funding Round

(Yicai Global) March 24 -- The Fund for State-Owned Enterprise Restructuring (FSOER), which was jointly established by several major Chinese SOEs, will raise CNY131 billion (USD19 billion) in its first funding round.

CNY26.2 billion, 20 percent of the total, has already been received and 10 projects have been approved covering cornerstone investments related to an SOE's overseas initial public offering; energy conservation and environmental protection projects; technology, media and telecom (TMT) projects; investments oriented toward emerging strategic industries and new businesses launched by SOEs.

Five or six sub-funds will be established in collaboration with SOEs to fund their business restructuring initiatives, China Securities Journal quoted the fund's chairman Zhu Bixin as saying in an interview.

The FSOER has partnered up with a group under the central government to launch an SOE merger and acquisition sub-fund worth about CNY50 billion, Zhu said. He did not elaborate further.

The FSOER was established last year by Beijing-based China Chengtong Group, among others, with CNY131 billion of registered capital. It now has 10 shareholders including China Postal Savings Bank, China Ordnance Industries Corporation, China Petrochemical Corporation and China Merchants Group.

Money raised by the fund is mostly invested in enterprises under the central government and other SOEs, with the aim of enhancing market concentration and capital allocation efficiency. Its investments cover industry integration and reorganization and SOE restructuring and business transformation. Focus has been placed on industry integration, specialized reorganization, production capacity adjustment, non-performing assets reorganization and international M&As carried out by SOEs under the central government.

The first investment made by the fund was a USD100 million cornerstone investment in China Securities' IPO in Hong Kong. Its second investment was a CNY95.58 million subscription to a private placement offered by China Metallurgical Group Corp. The third was a CNY1.8 billion subscription to a private share placement offered by Air China, after which the fund became the airline's seventh largest shareholder.

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