China's embattled Huarong secures $6.5 bln investment (updated)

China Cinda Asset Management

18/11/2021 04:30

(Adds details of divestment deals, background)
    Nov 17 (Reuters) - Chinese state-owned asset manager China
Huarong Asset Management  2799.HK  said on Wednesday it will
receive fresh capital worth 42 billion yuan ($6.59 billion) from
a state consortium led by Citic Group as part of a restructuring
plan.
    Huarong intends to issue https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1117/2021111701162.pdf
 a maximum of 39.22 billion domestic shares and not more than
1.96 billion shares listed on the Hong Kong exchange to a
consortium of investors including Citic Group  CITIC.UL , China
Cinda Asset Management  1359.HK  and China Life Insurance
 601628.SS , among others.
    "It is of the view that the Issuance is the only practical
measure to solve the capital insufficiency difficulty of the
company and to satisfy the regulatory requirement," Huarong said
in the filing to the Hong Kong stock exchange.
    The deal would allow Citic Group to assume the Chinese
government's controlling stake in the embattled asset manager as
part of a plan by regulators to fold financially shaky state
asset managers into financial holding groups.  urn:newsml:reuters.com:*:nL1N2Q1062    
    Citic Group would subscribe to no more than 18.82 billion
shares in Huarong while China Cinda, in a separate statement https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1117/2021111701216.pdf,
 said it would contribute about 4 billion yuan to pick up a
4.89% stake in Huarong.
    Huarong, one of the four state distressed debt managers and
counts China's finance ministry as its largest shareholder, had
missed a March deadline for filing its 2020 earnings, sparking a
rout in its U.S. dollar-denominated bonds that spread to other
Chinese issuers. 
    Bonds rebounded in August after the state-backed rescue
plan, and its divestment deals amid a regulatory push to sell
non-core assets as part of its business revamp, Reuters has
reported.  urn:newsml:reuters.com:*:nFWN2PP0FC urn:newsml:reuters.com:*:nL2N2NM1IY
    In its Wednesday statement, Huarong said that it would sell
its 40.5% stake Huarong Xiangjiang Bank, and 79.9% stake in its
financial leasing unit. It previously revealed similar
divestment plans in consumer finance unit, and securities unit.
    On Tuesday, Huarong has been granted approval to raise 70
billion yuan of financial bonds in the interbank market, as it
continues to recover its credit profile and re-focus on its main
bad loan business.  urn:newsml:reuters.com:*:nL4N2S70UN
    In August, Huarong announced a first-half 2021 profit of
158.3 million yuan ($24.5 million) and a nearly $16 billion loss
for 2020.  urn:newsml:reuters.com:*:nL1N2Q1062

($1 = 6.3780 Chinese yuan renminbi)

 (Reporting by Tejaswi Marthi in Bengaluru, Cheng Leng and Ryan
Woo in Beijing; Editing by Krishna Chandra Eluri and Uttaresh.V)
 ((Tejaswi.Marthi@thomsonreuters.com;))