Investors in Cinda subsidiary cry foul

Compensation demanded as bad-asset manager prepares to float, with investors claiming Cinda reneged on promise to float insurer Happy Life

PUBLISHED : Thursday, 12 December, 2013, 3:29am
UPDATED : Thursday, 12 December, 2013, 2:46pm

A consortium of minority investors in a loss-making subsidiary of China Cinda Asset Management has petitioned for financial compensation a day before the trading debut of the bad-asset manager.

The investors in Beijing-based life insurer Happy Life - a business venture set up by Cinda and 12 corporate shareholders in November 2007 - filed a letter of complaint with the Hong Kong stock regulators, arguing that Cinda failed to fulfil its original agreement to float the insurance firm.

According to the letter of complaint sent to both the Hong Kong stock exchange and the Securities and Futures Commission, the minority group at Happy Life, which was majority-owned by Cinda, had requested Cinda shares in exchange for their equity stakes in Happy Life after a slew of share issuances that diluted their holdings.

The disgruntled investors include state-owned firms Chery Auto and China Travel Service Group, as well as a privately held investment arm of Hong Kong-listed Dingyi Group Investment. Shares of Dingyi have been suspended from trading since July and the firm issued a profit warning last month.

A Cinda spokesman yesterday said the accusation was legally baseless and that the company had informed the Hong Kong and mainland regulators about the latest position on its subsidiaries.

A Shenzhen-based investor representing the group told the South China Morning Post that poor corporate governance, disappointing operating performance, and a breach of promise to list Happy Life were among the reasons the minority investors are angry. "The listing of Cinda has limited the likelihood of a separate listing of Happy Life after being classified as a subsidiary company," the investor added.

Cinda, the first to float among the four bad asset managers established in 1999, said in its listing prospectus that Happy Life failed to meet the regulatory requirement on minimum solvency margin ratios last year, and the mainland's insurance regulator had imposed relevant measures on the troubled insurer in March.

Shares of Cinda were traded at 15 per cent above their offer price on the grey market yesterday, according to local brokerage firm Bright Smart Securities. They will make their official trading debut today.