Feb. 18, 2008 (China Knowledge) - U.S. investment bank Bear Stearns and CITIC Securities<600030>, China's largest securities firm, are renegotiating the share swap agreement they reached last year, focusing on cutting convertible prices of both sides' share by the same extent.

After the reciprocal adjustment, CITIC would hold 9.9% of the U.S. bank, up from the previous 6%. And Bear Stearns' stake in the Shanghai-listed firm would be lifted to 7.5% over time, said an insider familiar with the situation.

The deal is still under discussion and also needs regulatory approval in China, but if successful, the brokerage arm of China CITIC Group would become the biggest single shareholder of the U.S. investment bank.

The subject of renegotiation came after a precipitous drop in the two parties' share price after last October's signing of an agreement on a cross-investment plan, under which CITIC would purchase 6% of Bear Stearns by injecting US$1 billion, and the U.S. bank would be buying US$1 billion worth of CITIC Securities debt, which would be converted to 2% stake.

Bear's shares have dropped to about US$80 from about US$120 in October when the agreement was formed, while CITIC's shares has been down nearly 36.4% to about RMB 71.