Guarantee Companies Behind Sunflower 3 Trust Bad Debts

I first posted this story last week: Jingu Trust Suing 32 Companies Over Single Trust

Jingu Trust is in the process of suing 32 small and medium enterprises. More suits could be coming because of the 92 SMEs that received loans from a trust that matured in August 2013, only 20 have paid back in full. Investors were paid their money at settlement.

Credit guarantee firms are at the heart of the problem: four firms provided credit guarantees to many of the SMEs loaned money by the trust product. Normally, the credit guarantee firm is first in line to guarantee repayment, but due to widespread defaults the firms are unable to meet their guarantee. Of the 92 companies loaned money, 20 have already gone bankrupt, shut down or had their assets seized by a court. Jingu is presently suing 32 of the companies as well as the 4 credit guarantee firms.

In one example, a firm put up 600,000 yuan as a guarantee and the credit guarantee firm was able to leverage this 5 to 6 times through a trust loan.

情迷担保：金谷信托开出黑色“向日葵”