Hua Nan Commercial Bank (華南銀行) announced yesterday that it would repurchase NT$6.365 billion (US$193 million) in Private Equity Management (PEM) Group products it sold earlier to local investors.
Hua Nan Bank, a banking unit of Hua Nan Financial Holdings Co (華南金控), had said earlier that its exposure to PEM totaled NT$6.8 billion and that it planned to buy back all of the problematic structured notes issued by PEM Group to ease investor concerns.
A Chinese-language newspaper yesterday said that the lender might pay as much as NT$8.5 billion as part of any buyback and that the company estimated it might have to book a loss of NT$5.1 billion.
The figure includes US$205.8 million in securities sold by the bank and NT$1.68 billion in PEM Group securities sold by Hua Nan Investment Trust Corp (華南永昌投信), the Commercial Times reported, citing unnamed company officials.
On June 8, the Chinese-language newspaper Apple Daily said that Hua Nan Bank was assessing the possibility of selling land in Taipei’s Nangang District (南港) and would use the proceeds to compensate investors for losses involving PEM Group securities. The report did not cite sources.
Several other local financial institutions earlier this month began working to buy back PEM Group products that they sold to investors after the founder of the US-based company, Danny Pang (彭日成), was accused by US federal regulators of defrauding investors out of hundreds of millions of dollars in a ponzi scheme. The company is now under investigation for fraud in the US.
In a stock exchange filing issued yesterday, Hua Nan Bank dismissed market concerns over capital availability in the planned buyback, saying that it would use its own capital to conduct the repurchase.
“The company has no capital shortage and liquidity problems at the moment,” the statement read.
Without denying or confirming possible losses cited in the Commercial Times report, Hua Nan Bank said in the exchange filing that it was evaluating potential losses from the buyback and would announce how large the one-time write-off would be.
The structured notes were issued by GVEC Resource II Inc, a special purpose vehicle set up by the PEM Group, Hua Nan added.
Other financial institutions involved in the PEM Group scandal include Standard Chartered Bank (Taiwan) Ltd (渣打銀行), Bank SinoPac (永豐銀行) and Taichung Commercial Bank (台中商銀).
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