Another Credit Guarantee Gone Bust, One Month After Backing A Trust

One of the features of the subprime lending fueled housing bubble in the U.S. was loans made closest to the peak failed first. This may be happening in China as well, with a trust product in trouble due to the credit guarantee firm going bust only one month after launch.

First some background on Handan, epicenter for this case. Handan in Hebei province has seen a lot of private lending and a lot of bankruptcies.

From April of this year: Handan Farm Cooperative Goes Bust; 100,000 Rural Households Invested Over ￥140 million; Boss Has Fled

That bankruptcy took down a number of smaller firms months later:

Hebei Rural Cooperatives Go Bust

Now the developers are going under. In one case a developer owes ￥3 billion, about half of which is owed to thousands of small private lenders. The developer has fled.

There's some English coverage of this news thanks to Macquarie being exposed to losses, due to the developer also owning a credit guarantee firm that guaranteed trust products.

From Australian Financial Review: Macquarie linked to bankrupt Chinese property developer

Handan Golden Century, a developer based in the central province of Hebei, is struggling to repay 2.9 billion yuan ($506 million) in debts and its major shareholder Shi Yubao may have skipped town, according to reports in Money Week and Handan News.

Handan Golden Century was the guarantor for a trust product launched last month by the Sino Australian ­International Trust Company (SATC), which is just under 20 per cent owned by Macquarie.

The product, known as Changying No. 66, is backed by a 280 million yuan loan to Linyi Golden Century, which is also controlled by Mr Shi, according to the Beijing-based business magazine, Money Week.

More coverage of China's credit guarantee system.

From iFeng: 邯郸开发商集资借贷还不起跑路 被骗者堵马路

Editor's note: in Handan, whether ordinary investors or the public, lifting the local businesses to raise funds borrowing, no not scared. Began nearly a year, there are a number of Handan local private enterprises have been gradually raising private lending defaults, the actual control foot events. Began in early August this year, leading real estate companies Handan Golden Century local real estate debt have been cleared nuclear announcement, reorganization and acquisition, stopping to pay principal and interest, as well as the actual controller of the company came running, the number of enterprises in private funds raised lending suit breach, Handan rapidly catalyze private financing risk lending concentrated outbreak. People's Daily reporter went to Handan investigation for several days, starting from today, will launch a series of reports open Handan private fund raising borrowing old chapter.

Beginning this year, the shuttle in Handan City taxi driver who surprised, Handan City, part of the main road was blocked from time to time to pull a large number of placards and banners crowd. Handan City Housing Authority in the mouth, an official of Handan private enterprises in private lending and financing of large-scale defaults, recently has become a major guide for Handan City petition.

Reporters learned that, in Handan private lending and financing involving breach of contract, the actual control of the enterprise on foot to the real estate industry's most ferocious, also includes building materials, construction, farming, medicine and other industries private. The borrowing and raising the scale of these enterprises are in the hundreds of millions range, Handan insiders familiar with the situation of the local private funds to reporters, a rough estimate, the scale of borrowing and raising dozens of fund-raising companies should have reached ten billion.

Dozens of private fund-raising tricks

People's Daily reporter learned from multiple news sources investigations, including at least currently in Handan Handan Golden Century Real Estate Development Co., Handan Zhuo Feng Real Estate Development Co., Handan Wan Poly Real Estate Development Co., Ltd. Hebei silver letter transport facilities, Hebei Jin Quebec Real Estate Development Co., Ltd. Handan County, Long co concrete, Handan Wu Anton Hill iron ore, PCC Central Manufacturing Co., Ltd. Hebei Green America, dozens of animal husbandry source of private funds and lending companies breach has concentrated outbreak.

Many investors involved in these enterprises to raise capital and loans to reporters, according to the working group led the establishment of Handan municipal government for breach Golden Century informed real estate financing, real estate financing loans Handan Golden Century size should be 30 billion yuan, of which the total amount of private funds Probably at 1.5 billion yuan, the bank financial loan institutions should be about 1.4 billion yuan; Handan local news sources, animal husbandry, Ltd. Hebei Green US sources by initial police investigation has revealed that the company in a years time illegal deposits from the public total more than 300 million yuan; according to an investor to preliminary statistics, the size of Hebei Jin Kui private funds in real estate should be about 300 million yuan; while another investor presentation, raising the size of Handan武安东Hill iron ore in the 7-8 one hundred million yuan.

Handan these companies to raise funds in the local nominal although many tricks, such as the purchase of earnest money, funds used to compensate intention money, etc., but without exception, raising companies are based on high interest and high returns to attract investors.

Handan Golden Century Real Estate Development Co., Ltd. as an example, its fund-raising methods including real estate retail mortgage, the retail pricing of 50,000 yuan per square meter, a split into 100,000 yuan for retail investors, as well as the pure form of fund raising borrowing. But, do most of the century estate mortgage and real estate division there are cases of secondary mortgage and sales.

Golden Century estate funds promised rate of return is very attractive, which funds annual return rate of retail mortgages and split the subscription can reach more than 20% of the amount of investment, while net borrowing in the form of fund-raising monthly interest rate is also 2 points or more, the actual annual interest rate has reached about 24%.

One investor Hebei Jin Kui Real Estate Development Co. introduced from early November last year, started for the civil Jinkui real estate funds, its main facade house as collateral to plan the construction of the Jin Kui Building, monthly interest payments for contract 2.5 points. But so far, Jin Kui building has yet to start, when raising the masses to demand the return of principal and payment of interest, Jin Kui estate responded that "no money."

Real Estate Development Co., Ltd. in Handan Taixiang agreement with the buyers, the so-called "Arranging fees" has become the name of Taixiang real estate fund raising.

"Taixiang charged to us 50000-100000 ranging Arranging fees, and other items when we agreed to cover up to the election room in advance. To buy a house when you can have a refund if you do not, this will give us time Taixiang high interest rates. "to Taixiang real estate investors pay a fee of 50,000 yuan Arranging told reporters," Taixiang now tell us to build a house after three years, investors demand a refund, Tai Cheung said the money is now the interest is gone . "

"These companies engaged in private funds, although some in the name sounds reasonable, but in fact they have deviated from the original meaning of the name of such Arranging fee." Above Handan local insider told reporters analysis, "which is a very sophisticated investors easy to distinguish raise funds, but they are willing to put money reasons, mainly to high interest rates, high return on capital. "

Through fund-raising scale government refused

List of companies in a long list of private fund raising borrowing above Handan Handan local insider told reporters in listed real estate developers accounted for more than half, and most of the fund-raising lending companies promised monthly interest to investors in two or more points, which means that the annual rate of return of funds promised at least more than 24%, also there are many financing companies to attract investors monthly interest rate at five points up and down, funds annual return of 60% or even doubled.

The source further described in Handan fund raising borrowing almost all small and medium sized enterprises private enterprises, but also Handan Golden Century Real Estate, silver letter Hebei Handan Traffic Facilities Co., a local leader of this large-scale private enterprises. Raising the number of investors in these companies involved in lending to the hundreds of thousands of people, whereas the amount of borrowing are also investors in the tens of thousands to millions of dollars.

Reporters from a staff member say that the Complaints Bureau of Handan City, in fact, since some companies raising private lending breach of Handan City, the actual controller and other issues to focus on foot broke off, the petition Handan City, plus stability work is already evident pressure.

Handan Golden Century Real Estate example, in the July 10th century estate gold posted restructuring mergers and acquisitions, credit and debt audit, investor stopped paying principal and interest and other three notices rumor actual control of the company after running, Golden Century Real Estate Hundreds of owners around the end of July activists took to the streets to collect debts, and plans to further appeal. Handan municipal government thus led the establishment of the "Government Helping Golden Century Working Group" to help solve the debt problems of the century estate financing. It is reported that this working group is already precedents in Handan.

Reporters also want to Handan Handan Municipal Publicity Department, City Hall, the Municipal Public Security Bureau, Handan City Intermediate People's Court, City Housing Authority, helping Golden Century Working Group and other departments to learn more about private enterprise in Handan City raising borrowing the relevant circumstances, however, these departments are no positive response.

"The situation in these places private funds, Jiangsu, Anhui and Shanghai are very common, not just in Handan, no big deal." A staff Handan Municipal Propaganda Department propaganda bureau in the evaluation of Handan raising borrowing situation said. And the reporter Handan Golden Century estate financing case related developments Handan City Public Security Bureau of Economic Investigation Brigade to time, a staff member of Economic Investigation Brigade responded that the case is not convenient to respond during the investigation, the case should be allowed to Municipal Publicity Department informed coordination.

Handan local businesses private funds lending situation has given rise to the attention of those in power in Handan City. Since late August this year, according to local media reports, Hebei, Handan City, the leading group to combat illegal fund-raising and disposition schedule, head back to take the lead in building and deploying twice to combat illegal fund-raising work.

In the August 26, Handan City Intermediate People's Court, Handan Municipal People's Procuratorate, Handan City Public Security jointly issued a circular asking all kinds of illegal absorb public deposits collect agency fees cases, commissions, rebates, commissions, royalties and other expenses account manager or other person surrendered to the judiciary before September 30 this year, overdue return, they will be deemed illegal fund-raising common crime, be held criminally responsible.

Meanwhile, the Handan municipal government organized a number of professional working groups stationed in illegal fund-raising businesses and areas of focus. Also in September 4, Handan municipal government held a special re-scheduling will be on a special solve practical problems.

"Handan City high-rise handle private fund raising borrowing things, first, because the ramifications are too broad, mass appeal, maintaining stability of the government, particularly the pressure; other reason is, I learned a lot of civil servants are also involved in these enterprises to raise funds lending their money should not come back, "the aforementioned source eloquently pointed out to reporters.