Zhejiang Cifu Group Overdue on ￥350 million Loan; Banks Owed ￥5 billion

Zhejiang Cifu Group is the latest firm in financial difficulty. 20 banks are owed ￥5 billion. Failed investment projects are the main reason for the firm's financial difficulties, including failed real estate development. Many state-owned companies and private companies alike went heavily into real estate after 2008 and this was only curtailed starting in 2010 for SOEs. SOEs did it because they could access practically endless amounts of credit prior to 2010. Many private firms went into real estate because their export businesses were suffering; some firms derived most or all of their profit from real estate and non-core ventures.

Some background from January 2011: Rising costs destroy profit margins in Wenzhou, firms shift to real estate

The article goes on to discuss how companies are dealing with current conditions. Some firms are exiting, some consolidating, and also upgrading of plant and equipment. The outlook isn't completely negative, as the weak firms exit and business stabilizes for the remaining firms. Some are also exiting to other sectors, such as solar and biotech.

However, many businesses aren't going this route. Instead, they are getting into real estate development (the large firms) and flipping properties (the small firms). Of Wenzhou's top 100 companies, 2 are real estate companies and 6 are construction companies, but 40 others have gotten into the property business. These manufacturing firms borrow money to finance their real estate operations and seven of these real estate development divisions each have more than 3 billion RMB in capital (roughly $500 million).

Of course the Wenzhou bubble burst shortly thereafter; prices have been falling since then. When the bubble was cracking in September 2011: Wenzhou factory owners run away from debt

This story for Cifu is the same: main business struggling, lots of cheap capital flowing around and blind investments in all manner of non-core businesses with a healthy dose of real estate speculation. How many more companies are in a similar position or will be if real estate continues to decline?

赐富集团3.5亿贷款逾期 20家银行50亿贷款何去何从

　Such an enterprise who has a glorious past, why get into a situation of serious losses in just two years?

Above the local chemical fiber industry sources told this reporter that happens, there are two reasons, one is due to the industry environment, the other is blind expansion of investment failure resulted in cash flow difficulties

April 25 morning, the rain started falling, the slightly dilapidated CIFU Zhejiang Chemical Fiber Group (hereinafter referred to as "thanks to the rich Group") headquarters, it is very quiet. In addition to the staff occasional, huge office building few people around.

Even in Shaoxing City, Zhejiang Province keqiao area, as local enterprises, the main chemical fiber, film and other business thanks to the rich group once renowned scale over ten billion heyday, and boarded the 500 Chinese manufacturing, its chairman also In all kinds of richest repeatedly appeared. However, is this the company has a glorious past, but now in deep trouble.

"First Financial Daily" reporter received a report on the list thanks to the rich Group's bank debt, as of the end of 2013, thanks to the rich Group 4 Total loans past due, the total amount of up to 350 million yuan. Keqiao district authorities to the "First Financial Daily" reporters confirmed that the company does have a number of bank loans in the past, because of operational difficulties, the Bank suspended its loan approval, resulting in tight cash flow.

"Unproductive investment is too large, and there is no gain, to assume the main industry of debt and interest, and ultimately caused the collapse of the main industry." An insider told this reporter that, thanks to the rich group management is flawed, blind expansion in recent years, investment mistakes, coupled with poor industry environment, the main industry is also a serious loss, and ultimately into cash flow difficulties. The reason or cause such a once-great local businesses both in deep trouble.

However, the concern is, including the above, including overdue loans, thanks to the rich Group only bank debt or up to 50 billion yuan, involving a total of 20 banks.

350 million yuan loans overdue

Since 2011, Zhejiang become the bank "bad" and overdue loans the hardest hit, since 2014, in some areas it is repeatedly enterprise funds strand breaks outgoing message. However, different from the past, thanks to the rich group, not only in the local reputation, and is a leader in the chemical fiber industry in Zhejiang Province.

CIFU Group's website information, the company is set Branch Trade and Industry as one of the large enterprises, now has five subsidiaries, the main industry across the fiber, film, pharmaceutical products of the three industries, and to get involved in real estate, mineral development and import and export trade and other fields, has been elected to the National Torch Plan Key High-tech Enterprise, 2010 total assets had reached 11 billion yuan.

"The vast majority are short-term loans, the interest is not got light, if only their own repayment difficulties very big." The insider told this reporter, as a local well-known enterprises, given the huge amount of enrichment groups, and banks in terms of waiting to see, is not yet take further measures against overdue loans.

April 25 morning, "First Financial Daily" reporters to give Rich Group Chairman Zhao Zhangfu office to verify the above, then the other party does not appear hurried appearance. Subsequently, one surnamed executives said they did not interview, claiming "no comment", as the reporter writing, thanks to the rich Group nor reply.

Subsequently, the "First Financial Daily" reporters call the bank to verify one by one, but the banks involved in the group's position extremely cautious overdue loans, some banks handling personnel, said the loan has not yet found an exception, there are bank staff claimed, had left the bank, on the above knowledge.

"Thanks to the rich group loans is normal, there is no overdue appear." Ruifeng Bank Chairman 俞俊海 on the phone on the "First Financial Daily" correspondent said, but then changed the subject, "now overdue loans are on the rise nationwide, such a situation is normal, so much overdue loans elsewhere, why do we have to report here? "

However, some banks to the reporter confirmed this. "Zhejiang's economic difficulties currently facing the government, banks, enterprises attach great importance to the hope that the media can be objective and fair coverage to help companies tide over the difficulties." Mobile phone text messages, a city commercial loan officer on the "First Financial Daily" Reporter said.

Bless Group, Shaoxing City, where the authorities yesterday keqiao reply "First Financial Daily" reporters confirmed that, so far, there is the Bank of Shanghai Ruifeng Bank, Nanjing Bank, three bank loans overdue, mainly due to collateral was closed, bank credit is not granted, such as temporary.

5 billion yuan bank debt pressure top

For a large enterprise, above 350 million yuan of overdue loans, but the tip of the iceberg of all thanks to the rich Group debt. Keqiao area as well as Shaoxing fiber, film industry's leading enterprises, thanks to the rich only in 2010 and 2011, the Group's net profit would total up to 11 billion yuan. Local banks compete once the object of pursuit. In its glory days, many banks and from its very close, competing to its loans.

Local banking sources told this reporter, starting in 2003, thanks to the rich Group massive outward expansion, spend billions of dollars invested in a number of projects in Henan, Yunnan, Guangdong, Jiangsu and other places, the business also extends to the film from chemical in medicine, and real estate. As in the initial stage of investment, these loans are the main industry of the main business loans, interest is also borne by the main industry and business enterprises.

Public information display, May 26, 2008, thanks to the rich group and project signing ceremony held in Luohe city, conduct Sha Li River, Luohe guesthouse in local development and construction projects, total investment of 1.5 billion yuan, a number of banks in Shaoxing Branch appeared Signing scene.

Informed sources on the "First Financial Daily" reporters, said March 18, 2011, on the first anniversary of the anniversary, Nanjing Bank Hangzhou Branch and five companies signed a total of 4.2 billion yuan of short-term financing bonds underwriting agency agreement, which That Zhejiang Euro-Asia Film Material Co., Ltd. (hereinafter referred to as the "Zhejiang Eurasia"). However, Bank of Nanjing, Zhejiang Eurasian subsequently found in the presence of multiple risk exposure investigation, does not have the conditions to issue bonds dropped.

There are banks CIFU Group as a quality project loans. Data "First Financial Daily" reporters obtained shows CIFU Eurasia Group, a subsidiary of Zhejiang had planned in late 2011 on the HKEx Main Board, intends to issue 750 million to 10 million shares, raising HK $ 1.5 billion and 20 billion respectively. April of that year, at a price of 502 million yuan in Zhejiang Euro-Asia, and the acquisition of related party Jiangsu Eurasia Film Limited ("Jiangsu Eurasia" below), there are 250 million yuan of funds from a joint-stock bank M & A loans, the loan period is 3 years .

In related materials, the above joint-stock bank, said the bank head office, branches, sub-branches three linkage, in just two months time to complete the project, due diligence, approval of loan. In addition to obtaining the bank M & A advisory fees of $ 6.5 million has been pledged to the majority of the proceeds deposited in the bank account after the listing, the future issuance of short-term financing bonds and other debt instruments by the bank as the lead underwriter and so on.

The bank believes that the move in the "pre-mining enterprises listing and financing needs to be listed in the M & A loan business has a strong demonstration effect" and therefore be treated as a classic case of merger and acquisition loans. However, these ideas soon become obsolete, thereafter, Zhejiang Eurasian listing plan has failed to materialize.

According to the "First Financial Daily" reporters available information, including the above, including overdue loans, thanks to the rich Group's bank debt totaling more than 50 billion. In addition to the four banks, of which there are 16 banks involved, in addition to a local bank, almost covering all current national commercial bank, its loans up to a state-owned big firms, the loan amount up to 12 billion yuan. However, the overall debt situation thanks to the rich group of related parties tight-lipped.

Shaoxing municipal government office earlier this year issued a document called on all relevant departments should keep enterprise risk information, adherence to corporate secrets, to prevent information leaks and ensure smooth disposal of follow-up venture.

To help CIFU Group keqiao financial district saddle town had also "borrowing" $ 100 million to help it weather the storm. For the $ 100 million "borrowing" funds, these keqiao district authorities and propaganda department who have said, this is not the borrower, the government has no right to lend to businesses, but thanks to the rich group's first prepaid Polyester Plant relocation compensation models.

Industry downturn, blind investment failure

Prior to 2012, thanks to the rich variety of Halo Group shrouded body, a local Rebel forefront of business models. Business information, thanks to the rich group formerly established in 1986, the first polyester plant in Shaoxing County, Shaoxing County, the shareholders (now keqiao District) saddle Town collective assets management company, saddle Town Economic Industrial Corporation, Shao Jin Chemical Fiber Group Companies registered capital of 108 million yuan. Peak annual sales income of more than 10 billion yuan, ranking in taxpayer keqiao area and even in Shaoxing.

According to news media reports, in 2003, production of chemical fiber industry is becoming saturated in 赵张夫 dominant, thanks to the rich Group decided to invest 1.7 billion yuan DuPont failed to develop successfully developed a direct pull mylar film technology, and in May 2005 May successfully developed new technologies to reduce energy consumption by 50%, the cost per ton fell 2,000 yuan.

Information on its Web site, also known as, since 2006, the film production and marketing company ranked first in the same industry, chemical production and sales ranked seventh in the same industry, 2007 and 2009 year is shown hundred enterprises in Zhejiang, manufacturing hundred 39, 73, holds an important position in the local industry.

Zhaozhang Fu himself is the local financial sector celebrities. Beginning in 2003, frequently appear in all kinds of rich list. In 2003, Zhao Zhangfu wealth of 5.9 billion, China ranked 400 richest people first 174, then again in 2005 to $ 1.1 billion fortune, ranking first 157 Hurun Rich List. 2006 to 2010, and appeared in five consecutive years Hoogewerf richest, most ranked 375 after only 2010 to 1.2 billion yuan of wealth Ranked # 167.

Today, whether it is business or personal, brilliant long gone. According to the informed source, since 2012, thanks to the rich Group began a substantial loss, including losses of 800 million yuan in 2012, 2013 loss of 600 million yuan, the total losses of $ 1.4 billion for two years, has been caught in difficult point, can only rely on Previously accumulated profits struggling to support.

Although the above has not been confirmed thanks to the rich group, but serious difficulties in its operations is an indisputable fact. The above keqiao area, authorities said thanks to the rich group does appear to operational difficulties, currently its film production line at full capacity, chemical fiber production line operation rate of about 60% due to chemical fiber production line at full capacity is unable chemical fiber industry of losses taken to limit production measures.

But for the amount of the loss, but said these keqiao district authorities to disclose. "In a market economy enterprises gain or loss is a normal phenomenon, as much a loss, there is still a loss and other issues related to corporate trade secrets, we can not tell them." In reply, keqiao District authorities said so.

Such an enterprise who has a glorious past, why get into a situation of serious losses in just two years?

Above the local chemical fiber industry sources told this reporter that happens, there are two reasons, one is due to the industry environment, the other is blind expansion of investment failure led to cash flow difficulties.

Keqiao District authorities in reply, "First Financial Daily" reporters also known, was the result of the above, one is the current fiber, the overall downturn in the film industry, profit margins dropped significantly; Second unbalanced asset structure, unproductive capital intensive assets; Third flawed business management, team execution is not strong.

"Zhao Zhangfu this person is the entrepreneurial spirit, but can be hard, but the management is not strong." Above the local chemical fiber industry sources said, thanks to the rich Group was established only when a township collective enterprises, the scale can be developed later, and there 赵张夫certain relationship.

But the source said that since 2003, due to the blind expansion, thanks to the rich group of investment projects in Jiangsu, Yunnan, Guangdong, Henan, mostly failed, only Eurasian established in 2009 in Jiangsu Province, the investment will be close to 1.7 billion yuan, But the project did not receive the expected results. In Henan, Yunnan and other places of real estate projects, also ended in failure, Zhejiang Eurasian listing eventually ran aground. "For example, in real estate, since there is no management capacity and management experience, and later a number of problems, causing heavy losses."

To give thanks to the rich rich Hotel Group to invest in Yanling County, Henan Province, for example, within a year it will operate three times a subcontract and property rights transfer. A judgment from the High Court of Henan Province show in March 2009, thanks to the rich thanks to the rich Hotel Group will be contracted to a large base Shen Yuan was born in operation, but the following year in January, the two sides signed an agreement, which was subcontracted to Xing Jianfeng. But after a lapse of six months, thanks to the rich Group prices $ 150 million, will give the entire equity Fu Hotel and assets transferred to Von construction. The two sides also purpose court.

In addition, thanks to the rich Group invested 350 million yuan in Yunnan Chenggong County real estate projects have had a dispute, the lawsuit has not yet settled. Beginning in 2006, the original owner of the land use right, thanks to the rich group, another investor litigation endlessly, has no end. CIFU Group as a defendant in Shaoxing Intermediate People's Court hearing will be May 30.

Shareholding Structure doubt

CIFU Group's management deficiencies in its ownership structure is also reflected. The company formerly known as Shaoxing County, the first polyester plant in this town for the saddle collective enterprise, the competent authorities have already approved its restructuring, but thanks to the rich group but has not been run. Business information, saddle collective asset management company town, saddle Town Economic Industrial Corporation and other shareholders of the Group has remained thanks to the rich, nor for the registration, nominally still a collective enterprise.

The data "First Financial Daily" reporters obtained show that as early as 1998, the former township enterprises in Shaoxing County Property Rights Reform Leading Group Office ratified CIFU Group restructuring, the proportion of collective ownership saddle town only 21.3%. In 2004, the town of collective saddle Asset Management Company has entered into an equity transfer agreement with 赵张夫, will transfer its shares to the latter group. GF Law Firm in Shanghai made the survey also questioned.

In this regard, the relevant departments in the district keqiao reply, "First Financial Daily" reporters, said that thanks to the rich group nominally collective enterprises, private enterprises in essence, its external investment managers discretion by the company. As to whether the enterprise has transferred the assets of the suspects, have not found, if it will be disposed of according to the law.

20 bank loans or scraped

According to the news media reported that as of the end of 2012, thanks to the rich Group's total assets 14.438 billion yuan, total liabilities of 14.55 billion yuan and net assets of -1.12 million.

Keqiao District authorities said in a written reply, as to whether the company's overall debt, or how much debt, this should be approved by the audit, according to market economy rules according to law.

Above the banks lending to bring great risks. "The most valuable asset is the land, the value of about 10 billion, considering the premium value of twenty or thirty million may, in the case of operations can not be improved, relying on their own, had estimated only from twelve to ten one hundred million. "the insider said.

"Pumping credit it will exacerbate the difficulties companies, do not smoke loans are also facing a lot of problems for the banks, but also hard to do, but we still have the spirit of good will, choice and enterprises tide over the crisis." Person on a bank above "First Financial Daily" correspondent said.

However, in order to solve business problems, Shaoxing City, keqiao district levels of government have begun to actively intervene. Keqiao District authorities responded that the "First Financial Daily" reporters, facing a grim situation, has introduced 29 aid policies to help banks and enterprises tide over the crisis. In addition, Shaoxing municipal government office also issued a joint on strengthening business risk prevention advice.

Keqiao area in the "Opinions on Further Improving the Work of helping venture (Trial)", said corporate risks have emerged, according to the "distinction, classification defuse" the principle of coordination disposal, large-scale, involving face broader large enterprises and groups "can guarantee the security", as far as possible to maintain production operations, effectively maintain regional financial security and social stability.

According to the informed sources, Rongsheng Group The Group intends to acquire thanks to the rich, but in view of the latter body is large, heavy debt, not directly take over temporarily take escrow business model intervention. April 25, Wen-jen water to the "First Financial Daily" reporters, said cooperation with Rongsheng Group, has basically arranged, but he was not disclosed details of cooperation on both sides. Keqiao District authorities when responding to this reporter, said the two sides also discuss cooperation.