China Securities to be folded in bailout

PUBLISHED : Friday, 12 August, 2005, 12:00am
UPDATED : Friday, 12 August, 2005, 12:00am

Troubled China Securities will effectively receive a 4.6 billion yuan capital injection under a bailout plan unveiled yesterday.

The restructuring of China Securities will enable Citic Securities, the larger of two mainland-listed securities houses, to achieve a much hoped-for business expansion.

Under the restructuring deal, Citic Securities will set up an investment company with China Jianyin Investment, the wholly state-owned company born out of last year's split of China Construction Bank.

The new firm will inherit the entire securities business and related assets of China Securities, according to a Citic Securities statement to the Shanghai Stock Exchange, where its yuan-denominated A shares are quoted.

Citic Securities will contribute 1.62 billion yuan, or 60 per cent of the new firm's initial registered capital of 2.7 billion yuan, with Jianyin forking out the rest to become a 40 per cent shareholder. The two will establish a separate asset management company to take over China Securities' non-core assets.

The asset manager will initially be capitalised at 1.9 billion yuan and will ultimately be owned 70 per cent by Jianyin and 30 per cent by Citic Securities. The plan has been approved by the board of Citic Securities and will be submitted for a shareholders' vote next month.

It represents a departure from the way other brokerages have been bailed out this year. Most have involved low-interest loans from the central bank or commercial banks, or a takeover by a government-owned company such as Jianyin.

The latest model will also help a sorely needed consolidation of the mainland's crowded and badly run securities industry.