(Yicai Global) July 12 -- A southern arm of China's central government may purchase a stake in an indebted trust company managed by Guangzhou-based conglomerate Cedar Holdings, according to an insider.

The State-owned Assets Supervision and Administration Commission of a local government in Guangdong province could buy some equity of Cedar International Trust, Beijing News reported yesterday, citing a person familiar with the matter.

Cedar International Trust, previously known as Zhongjiang International Trust, had almost CNY1.3 billion (USD200.9 million) in bad debts in 2019. Its net loss was CNY1.5 billion. The firm hasn't published earnings reports after that.

The acquisition can enhance Cedar International Trust's capital strength and credit conditions to reduce risks, industry insiders told the same source. Meanwhile, Cedar Holdings could gain billions of US dollars through the transfer.

Cedar Holdings has invested over CNY16 billion (USD2.5 billion) in the trust company after buying it in 2019, including about CNY10 billion in handling defaults. Cedar International Trust still has CNY3.8 billion in liabilities, the report added.

Cedar Holdings, a Fortune Global 500 company, was established in 1997. It is active in the petrochemical and real estate sectors, and it also owns two listed companies, rubber manufacturer Zibo Qixiang Tengda Chemical and clothing retailer Sinoer Men's Wear.

Editor: Emmi Laine, Xiao Yi