The Chinese government hopes to buy some of the private equity assets of General Motors' underfunded pension plan, hoping to pay from $1.5 billion to $2 billion, according to the Financial Times report. China, which has nearly $1.2 trillion in U.S. treasuries, has been hoping to capitalize on the liquidity concerns of assets managers like pension funds while the financial market remains volatile by acquiring their assets.
The paper said that GM's pension plan has stakes in several of the most prestigious private equity funds in the U.S. and Europe, such as the Carlyle Group LP, the Blackstone Group LP and CVC Capital Partners Ltd.
The sale, which has yet to be completed, will involve the transfer by GM adviser Performance Equity Management LLC of stakes to the State Administration of Foreign Exchange, which controls over $3 trillion in China’s foreign exchange reserves. The newspaper said that State Administration gets advice about the deal from Lexington Partners LLC.
An investment adviser told The Financial Times that the deal was discreet, even by private equity standards, since there’s obviously some concern about the sales of U.S. assets to China, especially during the election year.
The top controversial issues in the current White House campaign are those involving the private equity industry and U.S relations with China, especially when it comes to trade and the outsourcing of jobs. The political debate may get worse with the sale of assets by GM's pension plan to China. President Barack Obama considers GM's $50 billion bailout in 2009 as one of his main achievements. [source: Telegraph]