Nov. 3 (Bloomberg) -- Citic Pacific Ltd., under investigation after predicting a HK$15.5 billion ($2 billion) loss from unauthorized currency bets, said talks with its parent for a standby loan facility may involve a share sale.

Citic Pacific, which is negotiating with Citic Group, China's largest state-owned investment company, for a $1.5 billion facility, will announce details of the arrangements ``as and when appropriate,'' according to a statement to the Hong Kong exchange.

The company's shares slumped and its debt ratings were slashed after it disclosed Oct. 20 the impact of wrong-way bets on the Australian dollar. Chairman Larry Yung, 66, flew to Beijing to seek a $1.5 billion standby loan.

Citic Pacific jumped 21 percent to HK$6.06 on Oct. 31 taking its market value to HK$13.3 billion before the stock was suspended pending an announcement. The stock has fallen 58 percent since the Oct. 20 disclosure.

The company's predicted loss, almost four times the $550 million China Aviation Oil (Singapore) Corp. incurred on jet-fuel trades in 2004, may be the largest foreign-exchange loss ever by a Chinese company, said Daiwa Institute of Research.

Citic Pacific bet that the Australian dollar would rise, incurring losses after the currency tumbled 30 percent against its U.S. counterpart from a 25-year high reached in July. The company, which makes steel and develops property, bought leveraged currency contracts to fund an A$1.6 billion ($1.1 billion) iron ore mine in Australia, it said Oct. 20.

Regulator's Probe

Hong Kong's Securities and Futures Commission started a probe into the company. Citic Pacific has been criticized by lawmakers for a six-week delay in revealing the trades.

The company's shares fell 42 percent between Sept. 7, when the board learned of the exposure, and Oct. 20 when it told investors. The city's benchmark Hang Seng index dropped 23 percent in the same period.

Citic Pacific had said it was in talks with banks to restructure the currency contracts.

The company is also in talks to sell part or all of its 56.7 percent stake in Dah Chong Hong Holdings Ltd., a car and food distributor. Citic Pacific has cash and loan facilities of HK$9 billion, it said last week. It had HK$31 billion of net debt at the end of June.

Beijing-based parent Citic Group, set up by Yung's father, former Vice President Rong Yiren, is arranging a standby loan of $1.5 billion.

Cathay Stake

Citic Pacific owns a 17.5 percent stake in Cathay Pacific Airways Ltd., Hong Kong's largest carrier, and a 52.6 percent stake in Citic 1616, according to its annual report. It also operates 9 power plants in China and 2 tunnels in Hong Kong.

The company Oct. 23 denied a newspaper report that Chairman Yung, 66, will quit.

Financial Director Leslie Chang, 54, didn't follow hedging policy and failed to seek the chairman's approval for the transactions, the company said Oct. 20. Chang and Financial Controller Chau Chi Yin, 52, were both ousted for the trades.

Citic Group had cash of HK$12 billion and committed loan facilities of about HK$16 billion as of the end of September, Moody's Investors Service said Oct. 21.

To contact the reporters on this story: Theresa Tang in Hong Kong at ttang3@bloomberg.net; Bei Hu in Hong Kong at bhu5@bloomberg.net.

Last Updated: November 3, 2008 08:48 EST