U.S. investment bank Bear Stearns and CITIC Securities, China's largest securities firm, are to revise a share swap agreement, increasing the stake in each other, according to sources close to the deal.
Ongoing talks are now focused on lowering convertible prices of each share without changing the fixed-investment scale. Each side is set to cut the price by the same extent, the source said.
After the price cut, CITIC would hold 9.9 percent of the U.S. bank, up from the previous six percent. As for Bear Stearns, the one billion U.S. dollars debt would convert to a 2.5 percent stake in the Shanghai-listed firm that would amount to 7.5 percent over time.
No information about the actual convertible prices or the extent of the price cut was available yet.
The revised plan is still under discussion and subject to regulatory approval. "If everything goes well, the plan will be made public in April after adjustment," Business Finance Review, a Beijing-based magazine, cited the source as saying on Thursday.
The adjustment came amid a share price slump for both sides after the agreement was sealed in October.
Bear Stearns, hit particularly hard by the worsening U.S. subprime mortgage crisis, has seen its shares drop to less than 80 U.S. dollars from 120 U.S. dollars in October. Meanwhile, CITIC's stock is down nearly 36.4 percent.
Bear Stearns and CITIC Securities agreed in October to a cross-investment plan. Under the agreement, CITIC will invest one billion U.S. dollars for about six percent of Bear Stearns, while the U.S. bank is buying one billion U.S. dollars of CITIC Securities debt, which will amount to two percent stake.
The two sides plan to share management expertise and technologies to provide new products and services to get a bigger share of China's booming financial market.
They are also considering setting up a joint venture in Hong Kong to offer a large range of financial services across Asia.
(Xinhua News Agency February 15, 2008)