Loan from parent may see share sale - ResearchInChina

Date:2008-11-04liaoyan  Text Size:

CITIC Pacific Ltd, under investigation after predicting a HK$15.5-billion (US$2-billion) loss from unauthorized currency bets, said talks with its parent for a standby loan facility may involve a share sale.

CITIC Pacific, which is negotiating with CITIC Group, China's largest state-owned investment company, for a US$1.5-billion facility, will announce details of the arrangements "as and when appropriate," according to a statement to the Hong Kong exchange.

The company's shares slumped and its debt ratings were slashed after it disclosed on October 20 the impact of wrong-way bets on the Australian dollar. Chairman Larry Yung flew to Beijing to seek a US$1.5-billion standby loan, Bloomberg News said.

CITIC Pacific jumped 21 percent to HK$6.06 on Friday, taking its market value to HK$13.3 billion before the stock was suspended pending an announcement. The stock has fallen 58 percent since the October 20 disclosure.

The company's predicted loss, almost four times the US$550 million China Aviation Oil (Singapore) Corp incurred on jet-fuel trades in 2004, may be the largest foreign-exchange loss ever by a Chinese company, said Daiwa Institute of Research.

CITIC Pacific bet that the Australian dollar would rise, incurring losses after the currency tumbled 30 percent against its United States counterpart from a 25-year high reached in July. The company, which makes steel and develops property, bought leveraged currency contracts to fund an A$1.6-billion (US$1.1-billion) iron ore mine in Australia, it said October 20.

Hong Kong's Securities and Futures Commission started a probe into the company. CITIC Pacific has been criticized by law makers for a six-week delay in revealing the trades. The company's shares fell 42 percent between September 7, when the board learned of the exposure, and October 20 when it told investors. The city's key Hang Seng index dropped 23 percent in the same period. CITIC Pacific had said it was in talks with banks to restructure the currency contracts.

The company is also in talks to sell part or all of its 56.7 percent stake in Dah Chong Hong Holdings Ltd, a car and food distributor. CITIC Pacific has cash and loans of HK$9 billion, it said last week. It had HK$31 billion of net debt at the end of June.

CITIC Pacific owns a 17.5 percent stake in Cathay Pacific Airways Ltd, Hong Kong's largest carrier, according to its annual report.




 

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