Excerpts: Morgan Stanley: What Great Wall?

  • The China Construction Bank is asking the government for “trial permission” to sell the debt at less than par value, says John Langlois, president of Morgan Stanley Properties (China). Assuming that problem is worked out, the venture will be set up as a 70%-30% joint operation, with Morgan Stanley holding the majority stake.
  • It will take on a portfolio of 700 troubled loans to companies with a total book value of $519 million. Instead of liquidating borrowers’ assets, the venture plans to help them remake themselves through a combination of debt restructuring, debt forgiveness, and refinancing.
  • But if that doesn’t work, it may have to rely on China’s untested courts to lay claim to the debtors’ assets. “The legal process will be a final option,” says Langlois.