Huishang Bank in China is planning to raise CNY20bn ($2.9bn) via bonds to support the acquisition of four local Baoshang Bank branches.
The lender will issue tier-2 capital bonds to raise the amount, Reuters reported citing a filing with the Hong Kong Stock Exchange.
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The proceeds will help Huishang Bank to ensure healthy capital adequacy level after the acquisition.
As agreed, Huishang Bank will take over Baoshang’s Beijing, Shenzhen, Chengdu and Ningbo branches. Overall, the transaction will involve the transfer of CNY106.5bn ($15.22bn) in assets.
It can be noted that Chinese regulators took over Inner Mongolia-based Baoshang Bank in May last year citing growing credit risks.
Baoshang had nearly $22.68bn of outstanding loans by the end of 2016. The figure was around 65% increase over its 2014 figures. The takeover was first such move by the government in the last two decades.
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By GlobalDataHuishang has been one of the largest creditors of Baoshang’s interbank debts.
Last month Reuters reported that local governments and a group of state-owned firms will acquire Baoshang Bank.
The local government is expected to hold majority stake in the troubled lender.
Huishang Bank, China Construction Bank and a national deposit insurance fund will also be strategic investors in the bank, the news agency added citing an official familiar with the development.
