GP ONE Capital ventures into China’s Distressed Assets market

VANCOUVER, BC, CANADA - 06-09-2018 (Press Release Jet) — Today, Vancouver based GP ONE Capital announced its strategy to partner up with Chinese entities to explore business interest in China’s Distressed Asset market.

Dubbed as “Gong Ping Capital” for its Chinese name, GP ONE is a newly founded investment firm, backed by some former Chinese bankers and Canadian entrepreneurs. “Of the four major Nation-wide asset management companies (AMC’s) in China, we are already looking to establish strategic relations with at least two market leaders”, said a Company’s senior official. This is a major step by GP ONE after three Canadian based investors recently made strategic investment in the Company. Headquartered in the financial district of Vancity, GP ONE is also setting up an office in Shanghai.

GP ONE’s strategy revolves around a niche market technique called Debt-for-Equity Swap (DES). “The Debt-for-Equity Swap is practically the best approach in China for non-confrontational restructuring of businesses with illiquid core assets. In the last 10 years we’ve seen the positive side of a credit and economic cycle. Now they are just so fiscally overstretched that the potential upside for our role along the bumpy ride in the looming credit bust is on the level of billions over billions”, said the above Company senior official. GP ONE’s China strategy is notably different from those of the more established private equity rivals, such as KKR and Lone Star, who have for years benefited from the traditional practice of buying up non-performing loans (NPL’s) in bulk from Chinese banks, and profiting from the ensuing legal and auction processes. 

While China is going through the tremendous undertaking of voluntary de-leveraging, global fund managers are fleeing the Asian high-yield credit market altogether. Already, in the last month, global funds pulled more than $5 billion from emerging-market bonds, data provided by Jefferies Group show.

The fear of default is everywhere. Just last month, Beijing has already allowed China Energy Reserve & Chemicals Group Co. (which counts state oil behemoth China National Petroleum Corp. as a major stakeholder) to default. Five months into 2018, there have already been 19 bond defaults totaling $3.1 billion, compared with $4.1 billion for all of 2017, according to data compiled by Bloomberg. Some big property companies are paying 20 percent above the benchmark lending rate, while some smaller competitors are hanging on three- to six-month bridge financing at an 18 percent annual rate, according to CLSA Ltd.

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About the Author: Sarah Tulowitzki

Sarah Tulowitzki is a financial reporter, focusing on technology, national security, and policing. Before joining Canadian Business Tribune she worked as a staff writer at Fast Company and spent two years as a foreign correspondent in Turkey. Her work has been published in Al Jazeera America, The Nation, Vice News, Motherboard, and many other outlets.

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