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Sunday, November 22, 
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CIC goes low-profile with reported Flowers deal

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Published February 8, 2008 at 10:10 AM
The Chinese are quick learners. If they get criticized in the U.S. for investing state money too brashly and openly in major banks like Morgan Stanley, they can always lower their profile and go hand in hand with an experienced U.S. investor. 

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Reports Friday morning claim that the Chinese Investment Corp. Ltd. is close to a deal with New York private equity house JC Flowers & Co. LLC, which would see the Chinese sovereign wealth fund put around $4 billion into a new fund for investment in struggling institutions.

 

JC Flowers wasn't commenting Friday morning, but according to both the Financial Times and The Wall Street Journa, the $200 billion Chinese fund is in the later stages of negotiations. CIC is the same institution that sank $3 billion into Blackstone Group LP last year -- to criticism at home -- and recently spent $5 billion on 9.9% of Morgan Stanley.

 

Who can blame Beijing for wanting to stay below the parapet, while letting its U.S. partner take the credit for helping weak banks in their hour of need? It may not work quite as smoothly as either the Chinese or J.C. Flowers himself might wish. Being a specialist in bank rescues can land you in all sorts of trouble, as Lone Star Funds, for instance, can attest from its troubles in South Korea and JC Flowers itself knows from the hostile reaction it received from patriotic, if, possibly, ill-informed opinion in Britain to its now defunct approach for struggling mortgage lender Northern Rock plc. Even in the U.S., JC Flowers dealt with unpleasantness over its attempt to walk away from student lender SLM Corp., better known as Sallie Mae.

 

But with the current venom directed at the alleged political agendas of sovereign wealth funds investing directly in other people's strategic national assets, it's no wonder CIC is keeping its head down. - Jonathan Braude

 

See report from the Financial Times

See TheDeal.com story on CIC-Blackstone

See TheDeal.com story on CIC-Morgan Stanley

See the latest from TheDeal.com on Lone Star

See the latest from TheDeal.com on Flowers-Northern Rock

See the latest from TheDeal.com on Flowers-SLM



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