WUHAN — Dongfeng-Citroen Automobile Co., Ltd. (DCAC) jointly signs a framework agreement with China Development Bank (CDB) and Orient Assets Management Corp. on a debt-to-equity swap valued at RMB2.34 billion (US$282 million).

Located in Wuhan, capital city of Central China's Hubei province, DCAC is a joint venture between DMC and France-based PSA Peugeot Citroen, with the former holding a majority stake. It is the first Sino-foreign joint-venture company to conclude a debt transformation deal and the first auto enterprise to link such a pact with a bad-asset manager and an investment bank.

All of the assets involved are in loan principals owed by DCAC. Of the total, half will be held by CDB, which has a bad-asset management unit of its own, and the other half by Orient, which functions as dull-loans manager of Bank of China.

Local industry sources say that after implementing the swap, DCAC will take 31% of the joint venture, instead of its prior 70%. CDB and Orient will equally share 39%. The French side has promised to add about RMB1.23 billion (US$148.6 million) into its investment to ensure a 30% equity in the venture.

DCAC, founded in 1982, is the third-largest car producer in China with a total investment of RMB10.3 billion (US$1.2 billion). Because most of the funds invested in the JV are borrowed from banks, the company has had to pay a large amount of interest annually, which has prevented it from making a profit to date.