本文发表在 rolia.net 枫下论坛OCTOBER 20, 2008, 12:34 P.M. ET
Citic Pacific Faces $1.89 Billion in Losses on Risky Currency Bets
By YVONNE LEE
HONG KONG -- Citic Pacific Ltd. said Monday it faces losses of some 14.7 billion Hong Kong dollars (US$1.89 billion) after an executive violated procedures by making risky bets against the U.S. dollar that soured when the dollar rallied.
Citic Pacific Chairman Larry Yung said Citic Pacific's major shareholder, the China-owned Citic Group in Beijing, had provided a US$1.5 billion standby loan to see it through the crisis.
It was the first big financial setback to hit a Chinese-owned firm amid the global crisis that has brought down several Western banks, including some of the top names on Wall Street.
Mr. Yung said Citic Pacific, which has assets in steel, iron ore, property and infrastructure, had fired group finance director Leslie Chang for making unauthorized currency trades, and group financial controller Chi Yin Chau for failing to provide proper oversight.
Mr. Yung told a news conference that Mr. Chang had failed to obtain approval for certain bets on the Australian dollar, the euro and Chinese yuan. Other staff will be disciplined, Mr. Yung said.
The currency bets were linked to Citic Pacific's efforts to buy equipment and materials for an iron-ore mine in Australia; supplies were purchased in Australian dollars and euro, Citic Pacific said.
Dow Jones Newswires attempted to reach Messrs. Chang and Chau for comment but people who answered phones in their Citic Pacific offices said they couldn't help locate them.
Mr. Yung said Mr. Chang took the currency positions through major Hong Kong banks, using a so-called "accumulator" position which exposed Citic Pacific to unlimited losses once the Australian dollar and euro fell against the U.S. dollar.
Citic Pacific said it has terminated some of its foreign-exchange contracts but not all of them; it could keep some of the remainder for operational purposes, particularly those denominated in Australian dollars. Mr. Yung didn't quantify the size of the contracts that were terminated or the amounts remaining.
He said the company would face a loss of about HK$14.7 billion based on current forex levels; however, as it intends to mark the contracts to market on Dec. 31, the actual loss could be higher or lower.
Mr. Yung said Citic Pacific had already realized losses of HK$807.7 million on the forex contracts as of Friday. Citic Pacific plans to realize all of the losses this year, so they won't affect the company's 2009 results.
Citic Pacific had been suspended from trade in Hong Kong on Monday and is expected to fall sharply when it resumes Tuesday.
Questioned by reporters, Mr. Yung said the company conducted an internal investigation and found no crimes or fraud had been committed. The company said in a statement it was "regrettable that the group's policies and procedures on risk management were not followed by colleagues responsible."
Citic Pacific said it had appointed accounting firm PricewaterhouseCoopers to investigate its internal controls and recommend changes.
Write to Yvonne Lee at yvonne.lee@wsj.com更多精彩文章及讨论，请光临枫下论坛 rolia.net
Citic Pacific Faces $1.89 Billion in Losses on Risky Currency Bets
By YVONNE LEE
HONG KONG -- Citic Pacific Ltd. said Monday it faces losses of some 14.7 billion Hong Kong dollars (US$1.89 billion) after an executive violated procedures by making risky bets against the U.S. dollar that soured when the dollar rallied.
Citic Pacific Chairman Larry Yung said Citic Pacific's major shareholder, the China-owned Citic Group in Beijing, had provided a US$1.5 billion standby loan to see it through the crisis.
It was the first big financial setback to hit a Chinese-owned firm amid the global crisis that has brought down several Western banks, including some of the top names on Wall Street.
Mr. Yung said Citic Pacific, which has assets in steel, iron ore, property and infrastructure, had fired group finance director Leslie Chang for making unauthorized currency trades, and group financial controller Chi Yin Chau for failing to provide proper oversight.
Mr. Yung told a news conference that Mr. Chang had failed to obtain approval for certain bets on the Australian dollar, the euro and Chinese yuan. Other staff will be disciplined, Mr. Yung said.
The currency bets were linked to Citic Pacific's efforts to buy equipment and materials for an iron-ore mine in Australia; supplies were purchased in Australian dollars and euro, Citic Pacific said.
Dow Jones Newswires attempted to reach Messrs. Chang and Chau for comment but people who answered phones in their Citic Pacific offices said they couldn't help locate them.
Mr. Yung said Mr. Chang took the currency positions through major Hong Kong banks, using a so-called "accumulator" position which exposed Citic Pacific to unlimited losses once the Australian dollar and euro fell against the U.S. dollar.
Citic Pacific said it has terminated some of its foreign-exchange contracts but not all of them; it could keep some of the remainder for operational purposes, particularly those denominated in Australian dollars. Mr. Yung didn't quantify the size of the contracts that were terminated or the amounts remaining.
He said the company would face a loss of about HK$14.7 billion based on current forex levels; however, as it intends to mark the contracts to market on Dec. 31, the actual loss could be higher or lower.
Mr. Yung said Citic Pacific had already realized losses of HK$807.7 million on the forex contracts as of Friday. Citic Pacific plans to realize all of the losses this year, so they won't affect the company's 2009 results.
Citic Pacific had been suspended from trade in Hong Kong on Monday and is expected to fall sharply when it resumes Tuesday.
Questioned by reporters, Mr. Yung said the company conducted an internal investigation and found no crimes or fraud had been committed. The company said in a statement it was "regrettable that the group's policies and procedures on risk management were not followed by colleagues responsible."
Citic Pacific said it had appointed accounting firm PricewaterhouseCoopers to investigate its internal controls and recommend changes.
Write to Yvonne Lee at yvonne.lee@wsj.com更多精彩文章及讨论，请光临枫下论坛 rolia.net