By Joost Akkermans
Nov. 13 (Bloomberg) -- Citic Pacific Ltd., the Hong Kong company under investigation after predicting a HK$15.5 billion ($2 billion) loss from unauthorized currency bets, said its parent will provide a $1.5 billion standby loan facility.
The loan will be replaced by a convertible bond issued to Citic Group, China's largest state-owned investment company, according to an e-mailed statement sent late yesterday. Citic Group will help the unit restructure its Australian dollar-leveraged foreign-exchange contracts.
The bonds will automatically convert into a stake in Citic Pacific at HK$8 a share, giving the parent a 57.6 percent holding in Citic Pacific, it said. Citic Pacific has been suspended from trading and last traded at HK$6.06.
Citic Pacific shares slumped and its debt ratings were slashed after the company, which makes steel and develops property, on Oct. 20 disclosed the impact of wrong-way bets on the Australian dollar.
The company bet 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 bought leveraged currency contracts to fund an A$1.6 billion ($1 billion) iron-ore mine in Australia, it last month.
Hong Kong's Securities and Futures Commission has started a probe into the company. Citic Pacific has been criticized by lawmakers for a six-week delay in revealing the trades.
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.
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.
To contact the reporter on this story: Joost Akkermans in Hong Kong at jakkermans@bloomberg.net
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