– Chinese state-owned asset manager China Huarong Asset Management 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 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, China Cinda Asset Management and China Life Insurance, 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.
Citic Group would subscribe to no more than 18.82 billion shares in Huarong while China Cinda, in a separate statement, 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.
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.
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.
($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)