China sovereign fund, Singapore’s UOB join US$14 billion bailout plan for troubled Chinese lender

China’s sovereign wealth fund and Singapore’s third-largest lender are joining a group of investors to inject US$14 billion of capital to bail out a Shandong province-based lender as more cracks emerged among smaller lenders in the world’s second largest economy.

Hengfeng Bank, which has not produced its accounts since 2016, is seeking to sell 100 billion new shares through a private share placement to state and foreign investors, without disclosing the issue price.

Central Huijin Investment, a unit of China Investment Corporation, will inject 60 per cent of the capital while the provincial asset management arm will provide 36 per cent and United Overseas Bank 1.86 per cent. The troubled lender is seeking 100 billion yuan by selling shares at 1 yuan a piece, according to a UOB statement.

The stock placement came after the government took over the lender in August, making it the third bank seizure since May, as regulators took a stronger approach to expose and crack down on financial risks among debt-laden lenders.

Worries over the health of China’s about 3,000 small lenders, including city commercial and rural banks, mounted this year as they faced increasing competition to attract deposits while corporate borrowers struggled to repay debts amid the slowest economic growth in nearly three decades.

Beijing has also tightened its grip over malpractices in an attempt to untangle the complex webs of financial institutions that prop up the business empires of tycoons. The moves have snared tycoons such as Xiao Jianhua, founder of conglomerate Tomorrow Group, and Wu Xiaohui, former chairman of Anbang Insurance Group.