A unit of Citic Group Corp., a Chinese state-backed conglomerate, may take part in bailing out investors in a troubled 3 billion-yuan ($496 million) trust product, Oriental Morning Post reported.
The transaction is under way, the newspaper reported yesterday, citing a person close to Industrial & Commercial Bank of China Ltd. The person declined to give the name of the unit or the amount it plans to invest, according to the report.
ICBC, which distributed the product sold by China Credit Trust Co. to its private banking clients, on Jan. 27 told customers that they can sell their rights to unidentified buyers to recoup the principal. China Credit Trust said earlier that it reached an agreement for a potential investment, averting the first trust default in at least a decade.
Two calls to Citic Group’s public relations office in Beijing went answered. The group, China’s largest state-owned investment firm, owns companies ranging from banking to oil exploration and reports directly to the nation’s cabinet.
Investors have until 5 p.m. today to accept the offer on principal repayment. The high-yield trust product, known as Credit Equals Gold No. 1, was structured to raise funds from wealthy investors for a coal miner that collapsed in 2012. The product is due Jan. 31.
A bailout would leave Chinese authorities with problems in the financial system including moral hazard, Standard & Poor’s said on Jan. 24. An opportunity for “instilling market discipline” would be missed, it said.
— With assistance by Jun Luo