June 28, 2017 / 10:23 AM / a year ago

China CITIC Bank to provide Hongqiao Group with $2.9 bln credit line

HONG KONG, June 28 (Reuters) - China CITIC Bank said on Wednesday it has agreed to provide a 20 billion yuan ($2.9 billion) credit line to China’s and the world’s largest aluminium producer, Hongqiao Group, for the next two years.

CITIC Bank, in a statement to journalists, said in addition to the “comprehensive” credit line, Hongqiao would integrate a range of CITIC’s other services including cash management, supply chain finance, investment banking, and international trade.

Trading in Hongqiao Group’s Hong Kong shares were halted in March after research firm Emerson Analytics published a report alleging the company underreported its costs.

In a report dated Feb. 28, Emerson Analytics said Hongqiao had hidden 21.6 billion yuan ($3.14 billion) in costs through under-reporting over the years and estimated that its profitability is less than half of what it claims.

The company’s shares fell as much as 8 percent the following day and were subsequently halted upon Hongqiao’s request. It was the third such report to take aim at Hongqiao after an anonymous websites also published negative claims about the company in November and December.

Hongqiao has rejected all the allegations as groundless and misleading and said in April it would seek legal remedy against Emerson for alleged defamation.

Ernst & Young, the company’s auditor, subsequently resigned over a disagreement with the management regarding whether the company should conduct an internal investigation into the various allegations.

The Hong Kong Exchanges and Clearing (HKEX) this month asked the company to address issues raised by E&Y, publish all its outstanding financial results, and to clarify the allegations raised by the Emerson report.

The company said it was taking “appropriate steps” to fulfill the conditions.

Reporting by Michelle Price; Editing by Nick Macfie

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