May 25, 2018 / 11:38 AM / 6 months ago

China's CITIC pays CEFC's Czech debts to end spat, to take over J&T stake

PRAGUE (Reuters) - Czech financial firm J&T said on Friday it had struck a deal with Chinese state conglomerate CITIC Group [CITIC.UL] to settle debts owed by troubled Chinese company CEFC, ending a dispute.

Privately-held CEFC has spearheaded a Chinese acquisition drive in the Czech Republic, championed by Czech President Milos Zeman, which includes a range of assets including engineering, brewing and real estate as well as a soccer club and an airline.

But the Czech-based CEFC business has been hit by problems at once rapidly expanding parent group CEFC China Energy, which started unravelling under a pile of debt. Its troubles were aggravated when it was revealed in March that founder Chairman Ye Jianming was being investigated in China.

CEFC’s biggest deal, to buy a $9.1 billion stake in Russian oil major Rosneft (ROSN.MM), has since fallen through and one CEFC business defaulted on bonds earlier this week. A plan to take half of one of J&T’s main businesses, banking group J&T Financial Group (JTFG), was also abandoned.

The Czech part of CEFC has for weeks said CITIC, a Chinese state-owned conglomerate, would take a stake in the business and help pay back 450 million euros in debt owed to J&T.

But as the talks dragged on, J&T Private Investments (JTPI) took over shareholder rights in CEFC Europe and put in place its own crisis management team last week.

JOINT PROJECTS

Friday’s deal ended the disputes and a spokeswoman for JTFG said that by Friday afternoon, CITIC had paid all receivables the J&T entities had from CEFC entities. A source close to the involved parties said around 12 billion crowns ($543 million) had been paid.

“After constructive negotiations, J&T Private Investments and J&T Finance Group SE on the one side, and Rainbow Wisdom led by the Chinese Corporation CITIC Group on the other, have agreed on a strategic cooperation,” J&T said.

The agreement sets out a longer-term partnership with CITIC under which CITIC’s Rainbow Wisdom will take over a 9.9 percent stake in JTFG, and 200 million euros worth of perpetual unsecured JTFG debt now held by two China-based CEFC entities, the statement said.

A spokesman for CITIC confirmed the deal but gave no details on its arrangements with CEFC, in which it is taking a stake.

“The agreement between J&T and CITIC represents a step forward for us to develop businesses in Czech and other European markets,” CITIC Group spokesman Liu Guang said in an email.

Reporting by Robert Muller and Jan Lopatka; Editing by Alexander Smith

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