Bad-loan buyers flock to Taiwan

In Taiwan, banks are lining up to sell bad loans. Three state-controlled lenders as well as Ta Chong Bank Ltd (大眾銀行), a lender to computer makers, and United World Chinese Commercial Bank (世華銀行), which is being bought by Cathay Financial Holding Co (國泰金控), will sell bad loans worth at least NT$100 billion by year-end, Lehman's Epstein estimates.

"Banks are serious about getting rid of their NPLs," said Rachel Wu (吳愛顗), UBS Warburg executive director in Taiwan.

United World plans to sell NT$9.5 billion of its NT$30 billion of bad loans in October, said Deputy Director Robert Lee.

General Electric Capital Corp, Lone Star Funds and Taiwan Asset Management Corp (台灣資產管理公司) bought bad loans with a face value of NT$56.5 billion last month from state-controlled First Commercial Bank (第一銀行). In March, the bank sold NT$13.2 billion of bad loans to Cerberus Partners LP and in April it sold US$131 million to Lehman.

"At the beginning of the year Taiwan wasn't much different from Japan as no one was serious about NPLs," said Jeffrey Hsia (夏中興), the managing director of Pricewa-terhouseCoopers in Taiwan, who helped organize the auction of First Commercial Bank's loans. "Now there are deals in the pipeline."