HONG KONG, Feb 12 (Reuters) - Bank of East Asia Ltd executives defended on Thursday a planned capital raising which is under pressure from hedge fund Elliott Management Corp, in a case that pits one of Hong Kong’s last family-owned banks against an activist fund.
New York-based Elliott has requested through a Hong Kong court documents that would shed light on the decision by the lender to issue 222 million shares, equal to 9.5 percent of its current share base, to Japan’s Sumitomo Mitsui Banking Corporation (SMBC), media reported on Thursday. Bank of East Asia management confirmed the media reports.
Bank of East Asia is issuing the shares under a so-called general mandate, a commonly used mechanism in Hong Kong which allows a company to issue shares up to 10 percent of its value without consulting existing shareholders.
It was not immediately clear what Elliott’s motives are in trying to force the bank to disclose documents that would reveal details of the board’s deliberation before announcing the capital raising. Elliott did not immediately respond to an email sent outside working hours seeking comment.
“We disagree with Elliott’s actions. The board believes that this placement is in the best interests of shareholders,” Bank of East Asia executive director Adrian Li said at a media conference in Hong Kong.
The deal will strengthen the bank’s capital ratio and deepen its ties with the Japanese lender, Li said in response to a reporter’s questions about the action by Elliott. SMBC, a unit of Sumitomo Mitsui Financial Group, declined to comment.
Founded in 1977 by Paul Singer, Elliot Management is known for its activist stance. In July last year Elliott took an 8 percent stake in another Hong Kong lender, Wing Hang Ltd , in what was seen as an attempt to pressure Singapore’s Oversea-Chinese Banking Group to increase the price of a proposed takeover bid.
Bank of East Asia earlier on Thursday reported a sharp annual increase in loan impairments due to China’s slowing economy impacting the bank’s borrowing clients. (Reporting By Lawrence White; Additional reporting by Taiga Uranaka in Tokyo; Editing by Muralikumar Anantharaman)