China's bad debt funds are no white knights for its crumbling real estate

China’s bad-debt managers, pegged just six months ago as potential white knights to the crumbling real estate sector, have turned out to be part of the problem.

Aggressive lending to embattled developers during the sector’s boom years has beset the $730 billion funds with heavy credit losses, sending their bonds tumbling and forcing Beijing to weigh a preliminary plan to restructure the sector, according to people familiar with the matter.

The troubles at China’s four largest managers of soured loans have worsened as the real estate crisis deepened this year, meaning they are unlikely to rescue the sector