Alibaba Group Holding Ltd (NYSE:BABA) recently introduced online loan auctions on its online shopping platform. The company made deals with important finance companies and for what it’s worth, this new venture seems to hold promise. Recent events indicate that this loan trading arrangements might just be a boon for non-performing assets.
The company has decided to cooperate with one of the largest state-owned loan restructurer in China to dispose non-performing assets worth more than 4 billion yuan (approximately $650 million). The company’s online shopping platform Taobao has made this possible. China Cinda Asset Management Co announced this Sunday that it has reached an agreement with Alibaba Group Holding Ltd (NYSE:BABA) to auction its bad loans.
The auctions are supposed to start from June 20. The company is trying to get buyers for large quantities of bad assets it purchased since 2012. Those assets eventually turned out to be hard to sell. The company is hoping that the cooperation from Alibaba Group Holding Ltd (NYSE:BABA) might bring potential buyers and relieve the financial burden from the company.
The auction service of Taobao is gaining popularity in recent days. Nearly 34 companies have used this service to auction properties, vehicles, intellectual property and shares. Even local courts are using the site to sell confiscated assets.
It is interesting to see that such a service can be used to get rid of bad loans. The service has potential to bring more number of buyers as individuals, organizations and companies are allowed to buy from the platform. This extends the reach of auction to larger audience. The company has seen 32 per cent rise in profits after it made deal with Alibaba Group Holding Ltd (NYSE:BABA).
This new platform creates a new investor base for bad loans and in turn leads to better price for the assets, according to a spokesperson of Taobao. Some even argue that this new venture of Alibaba Group Holding Ltd (NYSE:BABA) might become a popular way to dispose bad assets.