China Huarong to Become Major Everbright Bank Shareholder After Bonds Converted
Liao Shumin
DATE:  Mar 14 2023
/ SOURCE:  Yicai
China Huarong to Become Major Everbright Bank Shareholder After Bonds Converted China Huarong to Become Major Everbright Bank Shareholder After Bonds Converted

(Yicai Global) March 14 -- China Huarong Asset Management, the country’s biggest state-owned bad loans manager, is set to become the fourth-largest shareholder of China Everbright Bank after deciding to swap the lender’s convertible bonds for shares.

Everbright Bank’s board has approved Huarong’s application to exchange its 122 million convertible bonds worth CNY12.7 billion (USD1.9 billion) into shares at CNY3.35 (49 US cents) per share, Beijing-based Huarong said yesterday.

As Everbright Bank’s stock price [SHA: 601818] ended 0.7 percent lower at CNY3.04  today, the agreed conversion price represents a premium of about 10 percent.

Huarong will own about 6.2 percent of the bank following the conversion, GF Securities said in a research report published today.

Everbright Bank issued 300 million convertible bonds to raise CNY30 billion for business development in March 2017. The notes are about to come due.

Huarong will help Everbright Bank convert most of the bonds into shares, raising core tier-one capital by between 0.1 percent and 8.8 percent and reducing the pressure to repay the maturing bonds, GF Securities added. The move also benefits Huarong, which will not have to buy the shares in the secondary market, which could drive the price above CNY3.35 a share, the brokerage said.

As a strategic investor, Huarong will have greater confidence in Everbright Bank, which has been paying annual dividends of at least 25 percent in recent years, GF Securities said. The high dividends will also help to offset the loss of the conversion at a premium.

China Huarong [HKG: 2799] closed 4.6 percent down at 42 Hong Kong cents (5 US cents) today, after earlier slumping by as much as 6.9 percent. The wider Hong Kong market fell 2.3 percent.

Editor: Futura Costaglione

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Keywords:   China Everbright Bank,China Huarong Asset Management,Convertible Bonds