(Yicai Global) Feb. 7 -- China's Huishang Bank plans to raise CNY20 billion (USD2.9 billion) in bonds to take over four branches of troubled Baoshang Bank, which has been under regulatory control for more than half a year.

The Anhui-based lender will raise the cash by 2021 to obtain Baoshang's assets and liabilities in Beijing, Chengdu, Ningbo and Shenzhen, it said in a filing to the Hong Kong Stock Exchange yesterday. It will retain staff and take over the debts in the cities to help the target recover, with the vast amount of cash raised through bonds ensuring the target's capital adequacy ratio is well ahead of the regulator's requirement.

Huishang will also pay CNY3.6 billion for a 15 percent stake in Baoshang, which will become a regional bank in Inner Mongolia 50.2 percent owned by the local government and one of its state-owned enterprise once the restructuring is complete. A deposit insurance fund under the central bank will also have a near 30 percent stake and the state-backed Construction Bank of China will hold 5 percent.

The China Banking and Insurance Regulatory Commission took control of the target in May 2019 after major shareholders misappropriated a large sum of money and led the firm into a debt crisis. The regulator has been looking for new investors to help restructure ever since.

Baoshang was one of three regional Chinese banks that fell into debt trouble and underwent regulatory control last year. Jinzhou Bank in the northeast was acquired by state-owned Industrial and Commercial Bank of China, the world's largest lender, and two state asset management firms in July; and Hengfeng Bank was rescued by Central Huijin Investment under the People's Bank of China and Singapore's United Overseas Bank near the end of the year.

Editor: James Boynton