Home Consumer debt Jack Ma’s Ant Strengthens Consumer Finance Unit With $ 3.5 Billion Fundraiser

Jack Ma’s Ant Strengthens Consumer Finance Unit With $ 3.5 Billion Fundraiser

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The consumer finance arm of Chinese company Ant Group Co. is bolstering its financial strength with a $ 3.5 billion capital increase, with most of the outside funding coming from a powerful public institution.

The sale of shares will nearly quadruple the registered capital of the newly formed unit, Chongqing Ant Consumer Finance Co., to 30 billion yuan, or the equivalent of $ 4.7 billion. This will allow the unit to maintain a larger balance sheet, which means it can extend more credit to customers, and marks a step forward in a key part of Ant’s overhaul.

Ant, a fintech company controlled by billionaire Jack Ma, was forced to reshuffle its operations after Chinese authorities canceled its initial public offering in November 2020.

One of the areas that caught Beijing’s ire was Ant’s colossal consumer loan operation, in which it provided loans to outside lenders, who bore most of the credit risk.

The unit represents a shift to a different business model with a more diverse range of financing options. The entity was approved by regulators earlier this year and registered in southwest China’s Chongqing Municipality. It is home to two Ant credit services, Huabei and Jiebei, which have been used by nearly half a billion people in China.

China Cinda Asset Management Co.

1359 -0.76%

, a large state-owned Hong Kong-listed company, on Friday announced it would invest 6 billion yuan, the equivalent of $ 942 million, for a 20% stake in the company as part of a larger fundraiser. of capital.

Cinda said her involvement would enable her “to establish close cooperation with the industry’s leading providers of consumer financial services.”

Three other new investors are also buying shares, Cinda said. These are state-owned Yufu Capital; a unit of Hong Kong-listed smartphone component maker Sunny Optical Technology (Group) Co.

; and a company controlled by the Chinese Internet group NetEase Inc.

Ant contributes half of the new capital and will retain its 50% stake in Chongqing Ant Consumer Finance Co., while another existing shareholder will reinvest and maintain its stake.

After Jack Ma criticized Chinese regulators, Beijing scuttled its fintech giant Ant’s initial public offering and it has largely disappeared from public view. WSJ is watching recent videos of the billionaire to show how he got into trouble.

Consumer finance companies in China need a minimum amount of registered capital to make loans. This capital can also help determine the maximum a company can lend, based on regulatory leverage ratios, and can be used as a source of funding, alongside bank deposits, wholesale borrowing from other financial institutions. and asset backed securities.

Cinda started out as one of the few “bad debt managers” created to help major Chinese banks get rid of their bad loans. It was not a direct investor in the Ant unit before, but its subsidiary Nanyang Commercial Bank Ltd.

previously contributed to the capital and will now hold a 4% stake.

Jack Ma and Alibaba’s Ant group in China

Write to Elaine Yu at [email protected]

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