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Fri, Nov 09, 2001 - Page 24 News List

Hua Nan to finalize joint venture

COMBINING FORCES The commercial bank and Lehman Brothers say they will sign a memorandum of understanding on a jointly run asset management company on Nov. 15

By Stanley Chou  /  STAFF REPORTER

Hua Nan Commercial Bank (華南銀行) and Lehman Brothers are planning a 50-50 joint-venture asset management company (AMC) and are scheduled to sign a memorandum of understanding to that effect on Nov. 15, a Hua Nan official said yesterday.

"We are planning to set up an AMC joint-venture with Lehman Brothers," said a Hua Nan executive who is directly involved in the case and asked not to be named. Lehman Brothers, a US securities firm, could not be reached for comment. The Ministry of Finance has been encouraging the local banking industry to set up asset management companies since back in July. Several foreign financial institutions have since then been scouting Taiwan for potential partners.

Hua Nan Bank plans to invest NT$10 billion worth of collateral as equity. The collateral is being generated from its non-performing loans (NPLs).

Lehman Brothers said it will match Hua Nan's collateral value, in cash, following an appraisal process that is agreed upon by both parties, according to Chinese-language media reports yesterday. Currently the Taiwan Asset Management Co (台灣金聯資產管理公司) -- set up by the Bankers' Association (銀行公會) -- is the only asset management company in existence which was created to dispose of the Taiwan banking industry's NPL collateral.

Lend Lease Corp, Australia's largest property developer, and Taishin International Bank (台新銀行) also signed a memorandum of understanding in August to set up a venture to buy and manage bad loans held by Taiwan banks and finance companies.

Several other foreign institutions, including Goldman Sachs, Morgan Stanley and General Electric Finance, are also interested in participating in the new business, the report said.

Executives are planning a four- to six-week waiting period to evaluate the final value of NPL collateral provided by Hua Nan. The period will start once Lehman Brothers and Hua Nan Bank sign the memorandum later this month. The earliest date at which the new venture could start to dispose of Hua Nan's bad loans would be the end of this year, the report said.

As much as NT$1.65 trillion, or 11 percent of bank loans were bad or may turn bad, the central bank said in September. Taiwan banks need to clean up bad loans as they embark on government-led mergers to create fewer, stronger banking groups in a nation which is home to more than 300 lenders. The government says about one in every eight loans are bad, a figure analysts say underestimates the real situation by half.

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