Advertisement
Citic, Cinda, China Life lead state firms in handing Huarong US$6.6 billion to help China’s largest bad debt manager avert bankruptcy
- Huarong will receive about 42 billion yuan of capital from a consortium of five Chinese state-backed investors
- Citic will become Huarong’s biggest shareholder after the bailout, with a 23.5 per cent stake, followed by China Insurance’s Rongxin Fund at 18.1 per cent
Reading Time:3 minutes
Why you can trust SCMP
0
China Huarong Asset Management said it would receive a bailout from five state-backed investors to stave off its bankruptcy, as one of the first and largest of the country’s five managers of distressed debt emerges from a restructuring.
Huarong will receive about 42 billion yuan (US$6.6 billion) from a consortium comprising Citic Group, China Insurance Investment’s Rongxin Fund, China Cinda Asset Management, China Life and a unit of the Industrial and Commercial Bank of China (ICBC), Huarong said in a late filing to the Hong Kong stock exchange. Huarong would issue shares at 1.02 yuan each under a specific mandate first flagged on August 18 that would require existing shareholder approval.
The issue price works out to a premium of about 23 per cent over Huarong’s last-traded stock price in Hong Kong of HK$1.02 before transactions were halted on April 1 for the company’s debt workout.
“The issuance is an important act aimed at addressing the company’s current difficulty of capital shortage,” Huarong said in its Wednesday filing. “[It is also aimed at] safeguarding the interest of [our] minority shareholders, and maintaining the stable operation of the company.”
Huarong was established in 1999 to take over the bad loans of ICBC, helping to clean up the books of what was then China’s largest state-owned bank ahead of its initial public offering. Over the years, Huarong’s own books were bloated by bad loans that could never turn around. Corruption by top officials, including former chairman Lai Xiaomin who was executed in January for accepting almost 1.8 billion yuan of bribes and misappropriating 25.13 million yuan, added to its financial woes.
Huarong has US$238 billion in liabilities - including more than US$20 billion of offshore bonds - and has drawn close scrutiny from investors across the world. The company’s borrowings amounted to 782 billion yuan as of June 30, of which those coming due within one year amounted to 578 billion yuan.
Advertisement