What’s new: China Huarong Asset Management Co. Ltd. agreed to sell a 70% stake in its consumer finance unit to Bank of Ningbo for 1.09 billion yuan ($172.6 million), the state-owned bad asset manager said late Monday.
The deal is part of Huarong’s efforts to divest assets and focus on its core business as the conglomerate revamps its sprawling businesses after reaching the verge of collapse.
Huarong put the stake in Huarong Consumer Finance Co. Ltd. up for sale in August. Shareholders’ equity in the unit was appraised at 1.04 billion yuan as of June 30, indicating that the sale price for the 70% stake was 50% higher than the appraised value.
The remaining 30% stake in the unit is held by state-owned Hefei Department Store Group Co. Ltd., Shenzhen Huaqiang Asset Management Group Co. Ltd. and Anhui Xin’an Asset Management Co. Ltd.
The unit reported a net loss of 263 million yuan in 2019 and delayed releasing its 2020 financial report, citing the parent company’s restructuring plan. According to shareholder Hefei Department Store’s annual report, the unit swung to a net profit of 3.56 million yuan in 2020.
The background: Huarong is majority owned by the Finance Ministry. It is one of China’s four giant bad asset managers established in the aftermath of the late 1990s Asian financial crisis to clean up soured loans in the banking industry.
The company gradually deviated from its original mission and embarked on a domestic and international spending spree under the leadership of former Chairman Lai Xiaomin, who was executed in January for crimes including bribery.
Huarong’s troubles emerged in late March when the company delayed its annual report. The scandal-plagued enterprise in August finally reported that it incurred a record loss of 102.9 billion yuan in 2020, triggering the suspension of its shares in Hong Kong and roiling markets across Asia.
Huarong disclosed a state-backed rescue package in August under which a consortium led by China Life Insurance (Group) Co. will inject billions of yuan to prevent the company from defaulting on billions of dollars in offshore debt.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (hello@caixin.com)
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