Pangaea buys stake in Chinese bank

Pangaea Capital Management, the Singapore-based distressed debt investor, has acquired a 6.88% stake in Huaxia Bank, one of five listed banks in China.

In a statement, Pangaea Capital Management said it has purchased 289 million non-traded shares in China’s Huaxia Bank for about $125 million (€101 million). The investment will make Pangaea the fourth-largest shareholder in Huaxia Bank.

The deal is a sign that Chinese regulators are relaxing limits on the ownership of banking assets in the country ahead of the anticipated unlimited exposure of the industry to foreign competition next year. However, the deal is still awaiting unconditional approval, according to reports. 

It is understood to be the first occasion in which a listed Chinese bank has sold its shares via an auction process.

The only known prior example of a non-Chinese and non-bank investor acquiring a stake in a Chinese lender was the sale of a 17.9 percent stake in Shenzhen Development Bank to US buyout firm Newbridge Capital for a reported $150 million in June 2004.

Pangaea Capital Management was formed earlier this year by former executives of Los Angeles-based real estate investor Colony Capital. The firm is headed by Robert Zulkowski, the former chief executive of Colony for the Asia Pacific region.

In May, Pangaea formed a joint venture with $6 billion US hedge fund Pequot Capital Management. The joint venture is seeking to raise $300 million from outside investors for a new Pequot/Pangaea Asia Opportunities Fund.