Harbin Electric, Baring Part Ways on Deal

Harbin Electric buyout story updated to reflect China Development Bank loan)

NEW YORK ( TheStreet) -- Harbin Electric ( HRBN) is seeking to become the first U.S.-traded Chinese stock to go private through a leveraged buyout structure, but its investment partner, Baring Private Equity Asia Group, is no longer to be a significant partner in the deal.

Harbin shares are down 10% in Tuesday trading.

Harbin Electric CEO Tianfu Yang and Baring previously announced a deal to take Harbin private at a price of $24 per share, with Goldman Sachs serving as the financial adviser to the Harbin CEO.

On Tuesday morning, Harbin Electric put out a press release stating that Baring's participation in the deal will now be limited to a right, not an obligation, to provide up to 10% of equity and/or debt financing.

The Harbin CEO stated his intention to pursue the $24 per Harbin share private buyout offer and seek alternative sources of financing. The documents filed with the Securities and Exchange Commission are worded in such a way as to state that Yang asked Baring to exit its proposed role in the private transaction.

Harbin Electric announced earlier this week that it had signed a loan agreement with the China Development Bank for $50 million, $15 million of which was earmarked to pay off outstanding short-term debt.

The Harbin Electric private buyout proposal garnered attention for being the first of its kind involving a U.S.-traded Chinese stock.


However, the company has also attracted the wrong kind of attention for a U.S.-traded China stock, including allegations that its books aren't in order and affiliations with an auditor that has been implicated in fraud allegations against other Chinese companies.

Last week, when Chinese company Rino International ( RINO) had a fraud case brought against it, Harbin shares sank due to is use of the same auditing firm, Frazer Frost.

-- Written by Eric Rosenbaum from New York.

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