China's Huarong to exit UCC Consumer Finance unit

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China's Huarong to exit UCC Consumer Finance unit

- China Huarong Asset Management Co. is planning to exit its stake in the UCC Consumer Finance unit, part of bad debt manager's acceleration push to sell noncore companies.

Huarong is moving to dispose of its 4.99% stake in Chongqing Ant Consumer Finance Co. said people familiar with the matter, who wished not to be named discussing private information. Huarong may invest the stake of Ant, which was initial valued at 399 million yuan, and then coordinate with other shareholders to increase the unit's capital, one of the people said.

Beijing huarong said it hasn't held any business operation discussions recently with Ant China. Ant declined to comment in an emailed statement.

Huarong's problems have roiled China's credit markets this year, with the firm now overhauling its business to restore confidence and shore up its finances. The conglomerate has been looking to sell nearly all of its units outside of distressed debt as part of a government-approved downsizing plan, people familiar have said.

The company also plans an external transfer of its 90% equity in Huarong Consumer Finance to public parties, it said in a filing on Monday.

Ant's consumer finance unit went into operation in June. It combines the company's most lucrative online lending operations, Huabei and Jiebei, after a regulatory clampdown.

Ant, China's largest provider of online consumer loans, put 4 billion yuan into the consumer unit, giving it a 50% stake in the business. The unit will need to provide 30% of funding for all loans, based on rules released earlier this year.

Huarong shares have been suspended since it missed the deadline for releasing 2020 results at the end of March. The firm is viewed as an important test of Beijing's willingness to backstop government owned borrowers amid a record wave of defaults.

The ruling Communist Party is keen to promote financial stability, but also wants to improve the pricing of risk in local credit markets and wean investors off the assumption that overextended companies will always be bailed out.

Huarong's board also proposed to modify the use of about HK $3 billion of proceeds raised from its 2015 initial public offering to provide capital contribution and fund support for major subsidiaries, according to a separate statement.

Shareholders will vote on the proposals at an extraordinary general meeting on 17 Aug. 2017. Hong Kong - traded shares of Huarong will remain suspended pending the company's audited annual results for last year, according to Monday's statement.

Huarong is expected to release its past due 2020 financial results before the end of this month, people familiar said. The company has been repaying maturing notes on time and reached agreements with state-owned banks to ensure it can meet obligations through at least the end of August.