Bank unit may be interested in loss-making Shenzhen firm Hong Kong-listed Citic International Financial Holdings (CIFH) yesterday launched a US$150 million convertible bond issue to raise capital for 'general corporate purposes', according to market sources. The offering followed reports that its wholly owned commercial banking unit, Citic Ka Wah Bank, is proposing to buy a loss-making Shenzhen-based finance company, China International Finance (Shenzhen). Investors last night over-subscribed the five-year senior unsecured bonds on offer from CIFH, which falls under the umbrella of State Council-controlled investment company China International Trust & Investment Corp (Citic), market sources said. The bonds, with a par value of US$1,000, will pay an annual coupon rate of zero to 0.25 per cent on a semi-annual basis. They can be converted into CIFH's main board-listed common shares at HK$4.151 to $4.32 each from January next year to November 2008, a month before the maturity of the bonds. The conversion price range represents a premium of 23 per cent to 28 per cent over the company's closing price of HK$3.375 yesterday. The offering has a US$30 million over-allotment option. CIFH officials could not be reached. JP Morgan, the sole book-runner for the offer, declined to comment yesterday. It was not clear whether the issue was to finance Citic Ka Wah Bank's proposed acquisition of China International Finance from its four existing shareholders at US$896,733. Once billed as China's first Sino-foreign joint venture finance company, China International Finance made a net loss of US$3.91 million last year. However, through the planned acquisition, mid-tier lender Citic Ka Wah could be in front of its Hong Kong peers as they venture into the mainland under relaxed asset hurdles in the closer economic partnership arrangement between China and Hong Kong that take effect on January 1. A Citic Ka Wah spokeswoman said earlier this week the bank was also considering opening a branch office in the Pearl River delta as part of its mainland expansion. She did not rule out future acquisitions. CIFH reported a 9.16 per cent year-on-year drop in first-half net profit to HK$306.95 million as a shrinking loan book and squeezed margins depressed its net interest income, which was accompanied by worsening non-interest income. CIFH's share price rose 3.05 per cent yesterday, bringing the year-to-date gain to 50 per cent.