People walk behind the logo of Swiss bank UBS in Zurich
People in Zurich walk behind a sign bearing the logo of Swiss banking giant UBS. REUTERS

China's Cinda Asset Management Corp., set up to buy bad loans from Chinese banks, received 10.4 billion yuan ($1.6 billion) from four institutional investors, including UBS, as it moves toward an initial public offering.

Zurich-based UBS AG, Standard Chartered PLC of London, Citic Capital Holdings Ltd. of Beijing and China's state pension fund, National Social Security Fund, all took a stake in Cinda. Combined, the four entities will own 16.5 percent of Cinda, Reuters reported Friday.

Cinda was formed by the government in 1999 to dispose of bad loans from China Construction Bank as part of a massive debt restructuring. Cinda and three other asset-management firms -- Orient Asset Management, Great Wall Asset Management and Huarong Asset Management -- were all set up to dispose of 1.4 trillion yuan of faulty loans from China's four biggest banks.

Cinda has continued to buy bad loans and has paid out about 96 billion yuan since 2006, according to the Wall Street Journal. The state-controlled company brought in the four investors as a prelude to an eventual listing on the Hong Kong Stock Exchange.

"Cinda will seek initial public offering and listing on domestic and/or overseas stock exchanges at the appropriate time after introducing strategic investors, according to the approval of the reform proposal by the State Council," the company said Thursday, according to the Financial Times.

Cinda initially received approval from the Chinese government to restructure into a corporation in July 2010, and Huarong Asset Management is following in its footsteps, the FT reported.

Cinda's announcement comes at a busy time for international investment in Chinese banks and financial companies. China's Bank of Communications Co. Ltd. said Thursday that it plans to raise an additional $8.9 billion from shareholders, including HSBC.