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Citic Pacific asks CIC to take 50pc stake in unit

Martin Zhou

Embattled Citic Pacific has approached the mainland's US$200 billion sovereign wealth fund to take a 50 per cent stake in Citic Capital Holdings to help bail it out after racking up massive losses in foreign-currency bets last year.

The property-to-steel conglomerate, a unit of investment powerhouse Citic Group, was still negotiating with China Investment Corp, though it was uncertain whether a deal would eventually be sealed, sources said.

Citic Pacific owns 50 per cent of Citic Capital, an investment and advisory firm whose business includes private equity, real estate and asset management.

Founded in 2002, Citic Capital mainly targets mainland projects and manages a combined US$1.6 billion in assets. Citic International Financial Holdings, another subsidiary of Citic Group, owns the remaining stake in Citic Capital.

Citic Capital declined to comment yesterday, while CIC was not available for comment.

A source said Citic Pacific and its parent have been seeking to sell assets to shore up finances after the company lost more than HK$18 billion on unauthorised currency bets on the Australian dollar by former finance director Leslie Chang Li-hsien.

'Citic Capital is a reputable investment company, and it's not a surprise that CIC is interested in buying a stake in it,' said Jing Yi, an analyst at Toipo Capital. 'For the sovereign wealth fund, it has to readjust its strategy after the loss-making deals in the United States.'

CIC, established in 2007, has racked up huge losses on investments in US private equity firm Blackstone Group and investment banking giant Morgan Stanley.

The sovereign wealth fund, designed by Beijing to direct capital outflow to ease excessive liquidity in the domestic market, is now more cautious about overseas investments amid the global economic and financial crisis.

Citic Group initiated talks with CIC last year, hoping the sovereign wealth fund would help bail out troubled Citic Pacific, sources said. However, no agreement was reached.

On the table

Total worth of assets under the management of Citic Capital, in US$: $1.6b

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