Shipping woes at subsidiary cost HSBC Holdings dollars 175m
The company said yesterday that it had been forced to make bad debt provisions and arrange a capital injection to support a Connecticut subsidiary, Concord Leasing. After a review of the assets held by Concord, HSBC has charged dollars 75m against profits for the third quarter of the year and at the same time injected dollars 100m of new capital.
It has also axed the top management of Concord. Michael O'Hanlon, the president and chief executive, and Richard Parkes, executive vice-president, have resigned. David Penketh, a senior HSBC executive, is running the leasing company until a new chairman is appointed.
Concord has 300 employees and assets of more than dollars 2bn, in health care equipment, computers, aircraft, graphic arts equipment, construction and ships.
The biggest source of the problem was a fleet of nine tankers and five specialised carriers it owns and leases to shipping companies.
An HSBC spokesman said the value of the ships was written down because of a weakening shipping market and an ageing fleet. Concord would make a loss in 1992, he added.
Concord went into the market after successes in other areas of leasing but had no expertise in shipping.
Covenants between HSBC and Concord state that its net worth must not fall below dollars 107.8m. The injection of dollars 100m is to bring the net worth above that level.
HSBC countered suggestions that it was accident-prone in the US, following large property losses at its Marine Midland Banking subsidiary.
A spokesman said: 'The deterioration has come about because of market conditions in rather the same way we were exposed to the problems of real estate.'
HSBC added that it was 'committed to support Concord as necessary and to ensure that it is able to fulfil its financial obligations'.
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