2014-01-20

Chinese Trust Problem Already Metastasizing

All of the stories about the ICBC/China Credit Trust trust default have stated a figure of 3 billion yuan. However, the total losses may be 4.3 billion with foregone profits included.

The article below from 21st Century Finance show's that there's a lot more to the story than a simple question of being unable to repay debt. It's the same story seen before: a company irresponsible enough to leverage itself to the hilt is also likely to be engaging in other irresponsible behavior.

Translation note: Google Translate translated Shanxi Zhengfu Energy as Shanxi amplitudes.

CCT: three black hole swallowed 4.3 billion gamble (中诚信托:3个黑洞吞噬43亿赌局)
21st Century Network Credit Trust suffered despite payment crisis, "Kim Cheng to open the 1st" trust schemes, the total amount involved in the trust funds nominally 30.3 billion. But 21st Century Network found behind the trust scheme, is actually a total amount of up to 4.35 billion yuan guarantee gamble.

Gamble corner Qingta, 4350000000 become Candu tripartite straw.

Borrower fraud from the outset, the intermediary deceiving trust scheme is by ignoring the interests of the risks. This sounded behind the incident risks alert trust industry in 2014, the number of hidden black holes.

"Trust is a trading pit father this, they managed to kill no matter buried." Some commentators in the 21st century network message.

4350000000 gamble

21st Century Network found that CCT "honest to the gold No. 1" trust fund trust scheme involving a total of 30.3 billion yuan. However, consumer trust funds, Shanxi Energy Group amplitudes aspects are beginning to sign agreements amounted to 4.35 billion yuan.

"Jin Cheng to open the 1st" trust scheme established in February 1, 2011, for a period of 36 months, until January 31, 2014 expiration.

Initially raised 1.111 billion yuan in February 1, 2011, the CCT and then immediately start the second period Kuomu again raised 1.918 billion yuan. Thus the whole Trust plans to raise the funds, totaled 3.03 billion yuan, ICBC as custodian.

Use the arrow trust funds are: the Central Trust Trustee in accordance with the agreed documents, the use of trust funds amplitudes Shanxi Energy Group Limited (hereinafter referred to as "Shanxi amplitudes Group") for equity investment by energy companies will be equity investments amplitudes purchase price paid for coal, technological inputs, coal washing plant construction, resource cost and other expenses approved by the Trustee.

Earlier reports showed amplitudes Group registered in Shanxi Luliang City of Shanxi Province, the actual control of the king in the lock, Wang Pingyan son, owns purple Xin Mining Group in Shanxi, Liulin amplitudes CHAR limited liability company and other subsidiaries and Sun Company, Control has five coal mines.

In the back of 3.03 billion yuan trust funds "honest to the gold No. 1" trust scheme, Shanxi amplitudes Group, Shanxi purple Xin Mining Group Co., Ltd., a limited liability company Liulin amplitudes CHAR way to guarantee equity pledge increase trust.

The master copy of the material of the 21st century network show, Shanxi amplitudes Group and Credit Trust secured document, the actual guarantee the integrity of the main aspects of care claims 43.5 million.

About 4.35 billion yuan of money, a project director of a trust company analysis, of which 30 billion of principal trust scheme, the remaining $ 1.35 billion, including a share of income investors should (interest), as well as a trust company, custodian bank, etc. fees charged.

Trust documents show "sincerity to open on the 1st of gold" to give investors more than the expected rate of return of 9.5% per annum. A conservative estimate of 3.03 billion yuan trust funds, the total amount of income trusts expected in three years more than 865 million yuan. If you can say about cashing trust scheme, the trustee and custodian bank Credit Trust Commercial Bank will also be benefited.

On the other hand, guarantees the principal debt of 4.35 billion yuan, also means that from the time the guarantee is determined from the relationship, respect owed Shanxi amplitudes Credit Trust Group for 4.35 billion yuan of debt, the actual annual finance costs 14.5%.

Shanxi face amplitudes Group bottomless pit, 3.03 billion trust fund obscure their thirst. Thus formed 4.35 billion of debt, whether it is the pressure amplitudes across the Group in Shanxi last straw?

Difficult to assert, as other usury Shanxi amplitudes Group itself owed, bottomless.

One of the black hole: the unspoken rules of the huge usury and industry

Trust 4.35 billion yuan of debt behind, while another group Shanxi amplitudes by nearly 30 billion loan sharks. In this regard CCT and ICBC never even unknowingly?

As a trustee of a trust scheme, CCT amplitudes in terms of the financial position of the Group in Shanxi disclosure, beginning more optimistic. Shanxi amplitudes Group usury until the incident.

Credit Trust provides trust documents show:

March 31, 2011, Shanxi amplitudes of the Group's total assets 6.888 billion yuan, net assets of 4.135 billion yuan.

June 30, 2011, Shanxi amplitudes of the Group's total assets 6.952 billion yuan, net assets of 4.147 billion yuan.

December 31, 2011, Shanxi amplitudes of the Group's total assets 6.424 billion yuan, net assets of 4.17 billion yuan.

Situation is mutated in May 11, 2012, this day, as chairman of Shanxi amplitudes Group 王平彦 been filed and criminal detention, and soon to the crime alleged illegal deposits from the public, was transferred to the Willows Police prosecutors prosecution.

CCT aspects of announcements, Shanxi amplitudes Group and its affiliates, in the second quarter of 2012, three new pen litigation, trust then appoint someone to verify and take emergency measures.

Ultimately reported that, as of the end of December 2011, the Group's debt has reached 9.8 billion yuan amplitudes, where the original principal amount of 6.2 billion yuan, 3.6 billion yuan of interest, including Credit Trust "honest to gold No. 1" Trust Scheme 30.3 one hundred million yuan and 1.32 billion yuan of principal costs (interest), which accounted for a significant part. Another 345 people directly to the amplitudes Group usury, usury principal total 2.98 billion yuan.

Prior to CCT side has responded to the media, said: Shanxi amplitudes group is recommended by the Industrial and Commercial Bank of China branch in Shanxi customers.

Shanxi amplitudes Group borrowed 2.98 billion yuan of usury, so wide number of people involved. Credit Trust trustee and custodian bank ICBC Does no knowledge?

In this regard, a trust company executives questioned: "more than 20 billion yuan of usury, CCT aspects of due diligence would not know to ask about the local casual Either they all know that did not do the best tune?.."

The middle is another trust business, said: "As a large local customer Shanxi, Shanxi Branch of ICBC may not know how usury case? '" Behind this deep water, how much money do not know took the middle square. "

"The boss can get ICBC, Prudential get outside usury also borrowed so much, that he is willing to spend money, capital is a game people play. Surface financing costs on this project nearly 15%, but this company actually give What is 18% of the base. doing coal trade, but also a year 22% to 25% of the profits. give two points, one point 30 million, two points 60 million they received a number of commissions? "above middle Trust Business analysis.

The two black holes: 3000000000 where to invest trust funds

3.03 billion yuan of trust funds to be used to exactly where any party did not give an exact answer. Face high risk of ownership issues the White House hilly coal mine, Shanxi amplitudes Group invested billions of dollars in funds whether the regulators?

CCT aspects documents show that as of March 31, 2011, which is "honest to open on the 1st of gold" was established in the first month, Shanxi amplitudes Group's total use of trust funds 1.111 billion yuan, while the second expansion The 1.918 billion yuan raised still deposited in the escrow account.

December 31, 2011, Shanxi amplitudes Group cumulative use trust funds 2.545 billion yuan, 484 million yuan remaining escrow account.

December 20, 2013, the balance of the monetary property trust scheme is only 86,342,600 yuan.

Trust funds in specific ways, the amplitudes of the Group's equity investment in Shanxi, the investment trust plans to hold a 49% stake in Shanxi amplitudes Group, another 51% stake held by his son Wang also pledged to Credit Trust.

CCT's announcement shows, Shanxi amplitudes Group will put equity investment funds for other expenses coal purchase price, technical inputs, coal washing plant construction, resource price and trustees approved. But for specific items of expenditure, were not disclosed. From the outside it has yet to learn.

Shanxi amplitudes Group in 2011 after many times over capital operation commenced generous, and both need big money-driven: 2011, its purple Xin Mining investment of about 430 million construction of 900,000 mines in Shanxi Province in northern town Shuiyu consistent; established in Taiyuan, Shanxi Kaifeng Source Energy Investment Co., Ltd. holds 100% stake in Jungar Banner, Inner Mongolia Yang mine drainage; Linxian County in Shanxi Luliang reorganization of the White House hilly coal, etc. 4.

Which the White House hilly coal mine, Shanxi amplitudes for the Group and Credit Trust, the fund is a black hole.

Public data shows, the White House hilly coal formerly Linxian White House hilly village collective mines since 2008 by the amplitudes Group Holdings subsidiary Shanxi Coking Co., Ltd. Sanko. This coal mine in Shanxi amplitudes Group's core assets, but there has been in the mining tenure disputes.

October 2008, the White House hilly village administrative proceedings to the Taiyuan Intermediate People's Court, said in an April 2002 White House issued the Shanxi Provincial Department hilly coal mining permit, the mining rights from the "white Linxian House hilly coal mine "to" Shanxi Coking Co., Ltd. Sanko "economic types from the" collective "is changed to" limited liability company "specific administrative act as illegal.

After several rounds of litigation, the Shanxi Provincial High Court of Final Appeal ruling in 2009, the mining rights of the White House hilly coal recovery is "Linxian White House hilly coal mine." This means that the amplitudes of the Group losing mine in Shanxi mining rights.

Since then, the Group has changed Shanxi amplitudes another approach: holding and looking through usury Credit Trust borrowed money to intervene in the capital campaign to integrate the White House hilly coal mines.

Input amplitudes Group in Shanxi coal mine White House hilly much, there is no one specific number, "China Business" Earlier reports said: put "almost 6 billion yuan."

According to the "21st Century Economic Report", October 2010 before Shanxi amplitudes Sanko Group has been paid to the former shareholders of one billion yuan Coke Company acquired equity funds, and because the complexity of the dispute had involved in the process of handling equity transfer procedures , asked the government to pay 1 billion yuan compensation before it can re-apply for a mining warrants.

In 2012, Shanxi Linxian the new White House hilly coal mine consolidation plan submitted, but has not been approved, the mining rights has yet to come true right from advancing. Shanxi amplitudes Group huge investment, not to mention the current recovery.

Face high risk of ownership issues the White House hilly coal mine, Shanxi amplitudes Group invested several billion dollars. Credit Trust Trust plans to have 49% stake in the company and acquired the remaining 51% equity pledge, as well as the Industrial and Commercial Bank supervision line, if there is to be an effective supervision over the use of funds?

Three black hole: the wealth loss on disposal of assets

Unregulated, as well as between the amplitudes of Shanxi Group and a subsidiary of the huge presence of related party transactions. With the launch of asset restructuring program output to the Group by the Shanxi amplitudes subsidiary huge amount of money for this loss will become dead accounts, from nothing to do with trust schemes.

After funding strand breaks, each creditor to obtain funds, at the end of 2012 began to dispose of Shanxi amplitudes Group assets. Credit Trust which owns the name Yang Jungar Banner, Inner Mongolia Coal Mine Drainage Company (hereinafter referred to as: Yang mine drainage) pledge of 100% equity interest.

November 2012, a 100% equity Yang mine drainage in Beijing Equity Exchange to transfer, listing price 350 million yuan.

21st Century Network master document, as of July 24, 2012, Yang Mine Drainage Company had total assets of 142 million yuan, the assessed value of 553 million yuan; net assets of 34,557,000 yuan, to assess the value of 445 million yuan. Which intangible assets (mainly in the mining rights based) assessed value of 416 million yuan.

Assessed value of 553 million yuan of assets, and ultimately to 350 million yuan turnover, is an impairment.

In this regard, the aforementioned Trust Project Director, said: "mining rights in the asset valuation is very nominal, compared to land far Nenggen real estate, construction engineering, housing, in the absence of systemic risk is very easy to handle. mining right mortgage is not to say, reserves itself is actually difficult to measure, but also large fluctuations in the international market in recent years, coal prices into the bottom of the valley, but also CCT 3 billion payment crisis detonated one of the important factors. "

Internal documents show that: Yang coal mine drainage in the company's asset transfer, while packaged transfer, as well as Shanxi Kaifeng Investments Limited 100% equity (originally amplitudes Shanxi Energy Group Co., Ltd. holds 90%, 10% held by the king in the lock). amplitudes and Shanxi Shanxi Kaifeng Group Investment Limited of 754 million debt. Transfer price of $ 350 million the total amount which the Department of bundled three assets.

Equity tripartite relationship, originally Shanxi Shanxi Kaifeng Group Holdings amplitudes source, source 100% owned Shanxi Kaifeng Yang mine drainage. Results of the asset transfer, making subsidiary Shanxi Kaifeng source, and Sun Yang companies are stripped from the Shanxi Coal Mine Drainage amplitudes Group.

However, the existence of 754 million yuan in Shanxi amplitudes Group Claims Shanxi Kaifeng source, that is, Shanxi Kaifeng source output to 7.54 million. It is a trust fund 754 million yuan of funds or loan sharks? Unknown.

The results of the asset transferred, is this has nothing to do with the 754 million yuan from Shanxi amplitudes Group, and then unable to recover.

Another problem is that the 754 million yuan in Shanxi Kaifeng source used in the Where? Yang coal mine drainage was only 142 million yuan of total assets, even if coupled with mining rights assessment, also only 553 million yuan. Shanxi coal mine drainage Kaifeng Yang source for 100% of the equity investment, will not be far from reach this amount, then there are 2 million was used in the Where? With the completion of the asset transfer, the problem will become permanent puzzle.

Payment crisis: Tube Shashui pipe buried?

Side, the other side of the coin is the end result as a trust plan, project and product design side Mishap only problem - how honored.

From a legal perspective, the event will undoubtedly liability shall be assumed Credit Trust, 21st Century Network contact either trust people, or people related to this industry have maintained a consistent answer.

Some industry insiders Trust, said: "The project is to provide ICBC, ICBC's customers but also the integrity of the collection of money is relatively small, it is a quasi-channel business.."

"This is actually legal risks channel business and financial side of the project, this product is only channel in the law is the product of trust, trust responsibilities to the trustee, not because of the behavior of the channel and have to work any reduction. "

Famous trust lawyers more than red sign analysis: "Commercial banks think this is a trust product, I am only for products channel trust that this is a commercial bank clients and projects, I provide access to commercial banks this project accident reason is. commercial banks and trust companies regarded each other as a channel leading to the product of the lack of actual control, the risk that no one went to investigate and verify. "

"Fatal consequences for both sides. Private banking business focus is the development of commercial banks blue ocean in the interest rate market led to lower deposit margins generally trend into bottlenecks, increase private banking business is to develop a business focus, there are so a single event, its private banking business is a fatal blow. the event on this one for the private banking business, as an investment adviser to the bank without its responsible role which is not a legal obligation, but the market credibility problem. "

On "From the trust perspective, this 'two out' of the project, trust companies must recognize that they are the subject transaction, rather than the channel, so money is not pay any.

Another source said: "The industry has been rumors that the bank is willing to bear most of the responsibility, but there is also a problem. ICBC is a listed company, but also a state-owned bank, why take responsibility if there is no legal basis, even if it? want to take, investors and regulators have reasonable grounds to oppose. "

In this regard, insiders give ideas:. "Although the law can not reveal all the details work every row, four asset management companies can be looped another problem arises, however, amplitudes have no assets, and how to go Asset Management the company's path? "

In this connection, the news also believes that "resolve to honor this trust issue, the key is not necessarily to explore who is responsible, but what kind of market you can arrange to solve."

Middle aforementioned trust business said: "the industry is very concerned about this one if you lose trust, bank trust consignment Recommend this one is even more difficult to do, because in the past we are authorized to prevail if the single channel by the risk-free. Trust lost, indicating that a third-party bank to promote the project and to promote the project no difference, we have to strengthen the choice of doing business in the future. "

For this event handling, Industrial and Commercial Bank of respect for the 21st Century Network said that at present unable to make any disclosure.

21st Century Network call CCT relevant project managers, each office will have been unable to connect.

For this event, the 21st century network will continue to keep a close eye.


This article doesn't get into the above details, but it does cover the trust issue and how large it has grown in the past few years.
Crunch Escalates as Money Funds Rival Shadow Banks: China Credit
The assets under management of such plans surged to a record 737 billion yuan ($122 billion) on Dec. 31 from 304 billion yuan on June 30, said Roger Schneider, senior director at Fitch’s Fund and Asset Manager Rating Group. Yu’E Bao, managed by Tianhong Asset Management Co. and sold online by Alibaba Group Holding Ltd., offers an annualized return of 6.7 percent, compared with the 3 percent official one-year savings rate. Some funds are offering higher rates, with news portal Eastmoney.com marketing a product that targets 10 percent.

“Clearly, yields of 8-10 percent are not sustainable,” Schneider said in a Jan. 10 interview from Frankfurt. “They will definitely come with the risk, and the premium includes both credit risk and liquidity risk in what they buy. There are strong refinancing needs among corporate issuers this year and the credit profile is to some extent deteriorating.”

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