Huarong gets approval to sell bonds and assets to replenish capital
(Bloomberg) – Shareholders of China Huarong Asset Management Co. approved a plan to sell assets and raise capital at its long-delayed annual general meeting, two months after the financial giant unveiled a bailout run by the state that ended speculation about his fate.
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Shareholders passed resolutions to extend the period during which it can issue the remaining 10 billion yuan ($ 1.6 billion) of its quota share of capital bonds and give the board of directors a mandate to issue up to 20% of its shares outstanding, Huarong said in a document filed Thursday after the meeting at its Beijing headquarters. They also agreed to sell a 72% stake in his securities unit and raise up to 70 billion yuan by selling bonds on the country’s interbank market.
The company secured a bailout in August from some of the country’s largest financial firms, including state-owned conglomerate Citic Group. After a long delay in releasing its 2020 results that scared off investors, the company revealed a record loss of $ 15.9 billion and an 85% drop in equity. His plight had become the biggest test in decades of Beijing’s willingness to support public borrowers, as global defaults hit record highs.
If implemented, the strategic investment will replenish Huarong’s capital, consolidate its foundation for sustainable operations and ensure that it meets regulatory requirements, Huarong said in late August. No details have been announced yet. Huarong could receive around 50 billion yuan in new capital as part of an overhaul plan, people familiar with the matter said, adding that control of the company would pass to Citic, although details are still being finalized. and can change.
Trading in Huarong shares will remain suspended, the statement said.
Huarong’s fate has been the subject of intense speculation, although he has so far paid all of his obligations on time. In addition to its close connection to the Chinese central government and its complex web of connections with other financial institutions, Huarong is also one of the country’s largest offshore bond issuers who sit in portfolios from Hong Kong to London. and New York.
Huarong bonds have recovered most of their value since late August. Its 5.5% note due 2025 was trading above par on Thursday, from a record low of 62.3 cents to the dollar in April.
Together with China Cinda Asset Management Co., China Great Wall Asset Management Co. and China Orient Asset Management Co., the company was formed to buy bad loans from banks following the Asian financial crisis of late 1990s, when decades of government-led loans to state-owned enterprises had left China’s largest lenders on the brink of insolvency.
Bad debt companies then expanded beyond their original tenure, creating a maze of subsidiaries to engage in other financial activities and borrow billions in the bond market. Huarong was the most aggressive of the four under former President Lai Xiaomin, who was executed in January for crimes including bribery.
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