UPDATE 1-Carlyle invests $25 mln in China loan guarantee co http://today.reuters.com/investing/financeArticle.aspx?type=mergersNews&storyID=2006-03-22T072157Z_01_SHA69152_RTRIDST_0_FINANCIAL-CHINA-CARLYLE-UPDATE-1.XML
Wed Mar 22, 2006
By George Chen
SHANGHAI, March 22 (Reuters) - U.S. buyout firm Carlyle Group will sign a deal on Wednesday to invest $25 million in one of China's biggest firms providing loan guarantees to small and medium enterprises, sources familiar with the deal said.
Carlyle's investment just comes ahead of a planned overseas listing of Credit Orienwise as soon as this year, said an Orienwise source, adding the Chinese company was reviewing a possible listing on the Nasdaq.
Washington-based Carlyle is set to become the third major foreign entity to pour cash into China's Credit Orienwise Group Ltd., following in the steps of Citigroup (C.N: Quote, Profile, Research) and the Asian Development Bank, which have both invested in the Chinese firm.
A venture capital unit of Citigroup bought a stake of the Chinese firm for $25 million in November. The ADB said in 2004 it would invest $10 million in Credit Orienwise.
"Carlyle's deal will be signed in Guangzhou this afternoon," said the Orienwise source, who declined to be identified.
The size of Carlyle's investment in Credit Orienwise will be as the same as Citigroup's, another source at the Chinese company confirmed.
Orienwise has not disclosed the size of the stakes controlled by the foreign investors.
Though small, the investment underscores the appetite among global private equity players to take a bet on the country's underdeveloped financial services sector.
Shenzhen-based Credit Orienwise had provided guarantees for around 14 billion yuan worth of loans by September in 2005, up from just 540 million yuan in 2001, according to its company Web site (www.cogsz.com).
"All the three foreign investors including Carlyle will be helpful to boost market confidence on our overseas listing when it does take place, probably this year," said the first Orienwise source.
Foreign private equity firms are flocking to invest in everything from tourism to property in China, the world's fifth largest economy which is tipped by some analysts to become the region's biggest market in a few years.
Carlyle has been at the forefront of China's private equity market, which is also being stalked by rivals like Kohlberg Kravis Roberts & Co. and Warburg Pincus.
It agreed in October to buy 85 percent of China's biggest machinery company, Xugong Group Construction Machinery Co. Ltd., for $375 million.
And the U.S. investor announced in December it would spend $410 million with U.S. insurer Prudential Financial Inc. (PRU.N: Quote, Profile, Research) for nearly 25 percent of China Pacific Life Insurance.
Investing in loan guarantees could prove lucrative given the difficulties faced by countless small and private Chinese firms which are unable to access bank loans without the right political connections or collateral.
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