(Yicai Global) Dec. 29 -- A newly-created investment company of Bank of Communications Co. [SHA:601328; HKG3328], one of China's five big state banks, has received approval to conduct debt-equity exchanges and provide complementary services, which will help the parent company adapt to changing financial environment.
The bank's wholly owned subsidiary, BoComm Financial Asset Investment Co., got go-ahead from China Banking Regulatory Commission yesterday, the parent company said in a statement today. The Shanghai-based investment firm has a registered capital of CNY10 billion (USD1.53 billion). The move aims to achieve professional management of market-based debt-for-equity swaps to help the bank adapt to changing economic and financial environment and become more competitive, it said.
CBRC approved founding of BoComm Financial Asset Investment in September, after which the investment firm entered into equity swap agreements worth CNY118 billion with a number of firms before its official opening, said BoComm vice president Hou Weidong at a press conference on Dec. 21.
The State Council adopted new policies on market-based equity swaps in October 2016, reviving China's debt-for-equity swap program after a 17-year suspension. Under the program, banks swap creditor's rights in companies for equity, thereby helping them reduce leverage and debt burden.