The Recognition Of China’s NPLs Has Begun: A Chinese Bad Loan Is Quietly Trying Find A U.S. Buyer

After repeated warnings about China’s soaring non-performing loans on this site (here, here and here), which have underscroed the basis of Kyle Bass’ “big trade for 2016”, namely shorting China’s currency in the bet it will have to massively devalue in order to address its incipient default cycle, virtually everyone is aware that China has a big Non-Performing Loan problem, a problem whose size we first quantified as much as $3 trillion, or the same amount as all of China’s FX reserves.

However, very few know that while the rest of the world is assuming that China will simply sit there and hold in its imploding NPLs which could well rip it apart from the inside in a massive wave of defaults, some of these bad loans have quietly found their way to the US, where they hope to find a buyer courtesy of the DebtX platform.

The offering:

DebtX is pleased to announce the sale of a RMB 556 million non-performing loan relationship. The offering includes two non-performing loans secured by real estate in Southern China. The collateral includes a petrochemical wharf and an office building that serves one of China’s largest petroleum storage houses, as well as land use rights and additional business assets of the borrowing entities. The loans have strong loan to values, an in-place lease through 2025, and a full guaranty.

The details:

So, to summarize, a Chinese loan worth RMB556 billion collateralized by RMB1.2 trillion in the form of a petrochemical wharf, or a paltry 46% LTV, and which has a tiny cost of capital of 4.5%, is not only no longer performing in China, but is hoping to find a buyer in the U.S.

Incidentally, this is what a typical Sinopec oil wharf looks like:

One can’t help but wonder how many trilions (in US dollars) of assets are about to be wiped out when the NPL wave is finally recognized, and more to the point, since Chinese bad loans are already quietly trying to find a buyer in “long investment horizon” hands, does this mean that the trillions (in US dollars) in NPLs are about to finally flood the mainland?

To all those who miss this opportunity to own a piece of Chinese “assets”, fear not – many more such NPLs are rapidly coming your way.