What’s new: China Huarong Asset Management Co. Ltd. reached 42 billion yuan ($6.6 billion) of share sale agreements with five strategic investors, the troubled bad asset manager said Wednesday night.
The accords mark a step forward in the long-discussed restructuring to rescue the debt-laden state-owned financial conglomerate from the verge of collapse. They came one day after Huarong won regulatory approval to sell bonds to raise as much as 70 billion yuan.
Hong Kong-listed Huarong said it signed agreements to sell shares to five investors including Citic Group, China Insurance Investment Co. Ltd., China Life Asset Management Co. Ltd., China Cinda Asset Management Co. Ltd. and ICBC Financial Asset Investment Co. Ltd.
The shares will be priced at 1.02 yuan apiece, representing a 22.89% premium from the previous closing price. Huarong will use the funds to supplement core capital.
The context: Huarong confirmed a plan Tuesday to borrow as much as 70 billion yuan by selling bonds to fund its main business such as the acquisition and disposal of nonperforming assets and debt-to-equity swaps.
The bond sale was part of a package of measures to raise capital and sell assets to pay down debt and strengthen the company’s balance sheet. The company has also been in discussions to bring in strategic investors.
The announced list of investors is slightly different from those Huarong cited in August. ICBC Financial replaced Sino-Ocean Capital Holding Ltd. in the final group of investors.
Huarong reported a net loss of 102.9 billion yuan in 2020 and had borrowings of 782 billion yuan at the end of June this year, with 578 billion yuan of the total coming due within a year. It had a further 285 billion yuan of outstanding bonds and notes, with 107.5 billion yuan due within a year. Its liabilities amounted to 96% of total assets at the end of June. Huarong has so far repaid all its bonds and interest on time.
Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (hello@caixin.com)
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