Shareholders of investment firm Citic Pacific Ltd (中信泰富) yesterday approved a US$1.5 billion convertible bond issue to its parent, a move aimed at rescuing Citic Pacific from a costly trading scandal, an unnamed source told Dow Jones Newswires.
The decision was expected to be confirmed to the Hong Kong Stock Exchange later yesterday.
“This is the best option available we have at this moment,” Citic Pacific chairman Larry Yung (榮智健) told reporters after an extraordinary general meeting.
Shareholders voted in favor of the deal with Chinese state-run parent Citic Group, the person familiar with the situation told Dow Jones Newswires.
“The financial support from Citic Group will help us get through this difficult time ... and help strengthen our operations in China,” Yung said.
Some shareholders sharply criticized Citic Pacific management over the foreign exchange debacle that now is under investigation by Hong Kong’s stock exchange and the Securities and Futures Commission.
On conversion of the convertible bonds, Citic Group will raise its stake in Citic Pacific to 57.6 percent from 29.4 percent. Citic Pacific is paying its parent HK$9.1 billion (US$1.2 billion) and the parent will absorb forex exposure with an estimated mark-to-market loss of US$11.3 billion.
Citic Pacific said Dec. 2 its realized and potential losses from the unauthorized forex bets, primarily on the Australian dollar, had risen to HK$18.6 billion, up from the original potential loss of HK$15.5 billion made public on Oct. 20 when the company disclosed the trading problems. Two executives lost their jobs over the scandal.
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