Shanghai Refuses to Renew Credit Guarantee Firm's License, Billions Due in October, Funds In Hollywood Films

Our old friend the credit guarantee is back in the news:

The company's important Kuailu Group also endogenous variables. Recently, the Shanghai Financial Office issued approval, to stop the renewal of its operating license Kuailu financing guarantee institutions, the abolition of a small loan company pilot qualifications. Sources close to the Finance Office, said that the initiative stems from regulators worried about the big risk.

...East Hongqiao financing guarantee companies and small loan companies considered Hongqiao East Kuailu Group's right-hand man. Kuailu's financial platform issued the loan contract, mostly guaranteed by the East Hongqiao financing guarantee companies, small loan companies are also an important source of Kuailu system assets.

Sources close to the Finance Office of the preceding fiscal new reporter said that this year a lot of financing guarantee company's business license no qualifications adjourned, because they feel too risky, not to do business, do not do after the expiration. "East Hongqiao is another type of regulation would not let him do."

According to the new financial reporter, east Hongqiao financing guarantee company a series of problems, including non-shareholder capital shares of its own funds, leverage is too high, the associated guarantees.

It doesn't help that the firm is trying to recover 2.5 billion in stolen funds:

Shanghai Municipal Office of Finance official website to hang out with the approval of the aforementioned two companies of the day, the Commission claims to recover Kuailu Group was established in Kuailu Group official website publicity of the first batch of "recovery of objects" list. List of involving nine people, mostly used his position to the illegal occupation of the company's assets, worth a total of nearly 2.5 billion yuan directly. Kuailu Group called Group of creditor group to help find and track these people, so to recover the funds and set up a lucrative incentives.

The firm also has 15 billion in debts to be repaid at the start of October, but good luck borrowing new debt to pay old debt if the government doesn't give them a license to operate...
快鹿系担保公司经营许可到期 上海不予再续

WSJ covered this firm in April: Chinese Lender’s Woes Expose Its Global Tentacles

A crisis rocking a loosely regulated lending network is underlining the risks of a financing boom that has channeled Chinese household money into Hollywood movies and Wall Street deals.

Droves of teary-eyed investors from around China have descended on Shanghai Kuailu Investment Group’s swanky offices over the past week to demand their money back after the firm halted redemptions on wealth-management products for the roughly 250,000 clients of the firm and three affiliates.

...The Shanghai firm invested in at least 20 feature films, including the coming release of “The Bombing” starring Bruce Willis, according to the company. Client money holds a slice of a $9 billion deal to privatize New York Stock Exchange-listed Chinese Internet-security company Qihoo 360 Technology Co., firm marketing documents show.

A crisis-management specialist that Kuailu’s founding chairman this month put in charge of sorting through $1.5 billion in liabilities told The Wall Street Journal it wasn’t a Ponzi scheme, a fear some investors have raised with the company.

“No cash flow. That’s the issue,” said Xu Qi, who estimated assets cover about 90% of what is owed to investors, but that most of it is tied up in investments or projects that can’t be quickly converted to cash.

...Business-registration filings show Mr. Shi founded Kuailu as an offshoot of a state-owned wire maker in 2003. Last year, Mr. Shi’s net worth was put at $750 million by Shanghai wealth-tracking firm Hurun Report. He is now hospitalized with a serious heart condition in Hong Kong, according to Mr. Xu.

Mr. Xu said Kuailu’s cash-flow problems worsened in March after government regulators alleged movie houses fraudulently inflated box-office receipts for “Ip Man 3,” a martial-arts movie starring Mr. Tyson and funded in part by financial products sold through Kuailu’s network.

Much more at the link.

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