China's Citic May Not Go Through with Bear Deal
China's CITIC Securities said on Saturday it could not guarantee it would complete a deal to invest about $1 billion in Bear Stearns given the U.S. investment bank's financial crisis.
On Friday, Bear hammered out an emergency funding deal with the U.S. Federal Reserve and JPMorgan Chase , saying its liquidity position had deteriorated.
"Our company has noticed the recent financing arrangement between Bear Stearns, JP Morgan Chase and other financial institutions, and we have also considered factors including the sharp fall in Bear Stearns' share price," said CITIC Securities, China's largest listed brokerage. "We cannot guarantee reaching a final agreement in the future," it said in a statement emailed to Reuters in response to media enquiries.
Last October, Bear and CITIC Securities announced plans to invest about $1 billion in each other and form a joint banking venture in Asia. The deal was seen as a way for Bear to boost its capital and expand its presence in Asia.
But Bear, the smallest of the major New York investment banks and the most reliant on slumping U.S. mortgage markets, was hit hard by the U.S. credit crunch. The final straw came in the last few days as financial markets deteriorated further and traders lost confidence in Bear.
"We acknowledge that the subprime mortgage crisis in the U.S. capital markets is continuing, so we will closely monitor the impact of the crisis on the investment deal," CITIC Securities said.
"At present, the two parties are still negotiating major terms of the deal and we have not completed due diligence on Bear Stearns. We haven't signed any formal agreement and we haven't paid any money."
The Chinese brokerage said it would "conduct an overall evaluation" of the deal. It did not say when its study might be completed.