2014-08-20

Wenzhou Tries to Restructure Credit Guarantee Firms; More Than ¥50 Billion in Bank Loans At Stake

Credit guarantee collapses in Wenzhou have put billions of dollars worth of capital at risk. Wenzhou government is working on unraveling several firms. About two-thirds of the credit issued or guaranteed by these firms went into speculative ventures.

“拆解”温州担保危局:五大担保圈成功脱套风险资金逾百亿
21st Century Business Herald guarantees, bank lines of credit business in a universal security settings, bind this "belt", as Huoshaolianying allusions safety rope, a loss for both its potential risks. Wenzhou's private economy is suffering from the invasion of this risk.

Wenzhou, a local judiciary told 21st Century Business Herald reporter revealed that the Wenzhou city government this year plans to guarantee the dismantling of seven laps, there are five laps dismantling secured a major breakthrough, "can be called a success dismantling."

Judicial Redemption: Restructuring Assets

Background with a local official media new media APP "Wenzhou finance" was released information, the local total of 28 laps guarantee, as of the end of June this year, 50.7 billion yuan of funds involved in bank credit. This information can then be removed rapidly. Informed sources have revealed that this set of data from the local financial regulator, true.

Wenzhou is one of the first to burst regional financial crisis. Since then, the security chain crisis, mutual insurance, UNPROFOR and other news have emerged from the crisis of Hangzhou, Jiangsu, Shanghai and other places.

From regulators to banks, guarantee ring hidden risks has attracted attention. By the end of July, under the China Banking Regulatory Commission issued a notice, to limit the size of UNPROFOR loans, while requiring banking financial institutions before the end of October, to complete the circle loan guarantee risk investigation.

Wenzhou's first attempt to become a national concern samples, a combining guidance circle guarantees to resolve the critical situation of the war is being quietly started.

21st Century Business Herald reporter from the staff at the disposal of more than guarantee circle learned dismantling guarantee circle is one of the important tasks of the main local government officials, from the municipal to the part of the county, has set up a special working group, the group members from the deputy mayor to the Commission by letter, political and legal systems and other staff.

"To guarantee the circle of bad business start-judicial reorganization is more crucial part." Justice system, a team member said, for problem companies, is not a simple bankruptcy, but the various departments involved in the coordination, presided over by the court, First start reforming the law, to retain and enhance valuable assets, operating channels.

For example, previously broke involving 1.1 billion mutual funds in city construction, premium quality of construction in the value of its real estate amounted to 5,000,000, the event of bankruptcy, which is part of the value vanished. In addition, the company is still in the country to build seven or ten projects, once a simple liquidation, will become unfinished.

"Restructuring is only a law scission, the real redemption and helping set off, and had to negotiate a joint government, banks and other agencies and departments." Preceding judicial sources, the planned dismantling of seven laps secured by Wenzhou municipal government principal officials responsible for coordination.

Huatai Group salvation Case

Successful operation in the security circle dismantling case, is Ryan's Huatai Group.

Ryan Huatai, founded in 1998, is the leading enterprise in the production of plastic films. According to the analysis of local people, due to excessive investment in recent years, off-site construction of the plant, the enterprise as a whole as well as the relocation of poor management, etc., resulting in huge losses occur Huatai Group funds strand breaks, on the verge of bankruptcy. Huatai Group loan financing in Wenzhou 14 banking institutions totaled 409 million yuan, involving five companies guarantee that five companies guarantee interbank influential in the industry.

Once Huatai Group fall, this 5 guarantee companies will also scraped and sparked a wider range of warranty chain crisis. Meanwhile, the group of six companies also provide external guarantees, involving an amount of 284 million yuan.

Thus, the Huatai Group's funding strand breaks, allowing 11 companies to be "set" into the circle.

Thailand's "off the set plan" After five months of deliberation began to take shape. The specific operation of the program is five guarantees enterprise X Group Ltd., Zhejiang Electric Co., Ltd. Y assume 30 million yuan, respectively, 15 million yuan debt, Huatai Group, former major shareholder "purification" to exit.

Huatai Group had 38 small shareholders, the original investment of recombinant enterprise exit after 46% of compensation, Huatai Group's equity other than X and Y by the overall acquisition of three major companies guarantee the rest, now share transfer formalities have been completed, financing Bank lending to be normal, involving the two production companies have resumed normal production.

"358" strictly control credit abuse

In dismantling guarantee laps risks, Wenzhou bank financing secured for circulation to form a circle, has launched a defensive measure. Bank Joint Action called "358" after more than explore the final shape.

August 16, Wenzhou City, in the area of ​​the full implementation of the integrated management system of total credit, further prevention and control of long credit, excessive credit, excessive risk guarantees, which issued a clear indicator of small micro-enterprise credit banks are not allowed more than three , medium-sized enterprise credit banks are not allowed more than five, conglomerates credit banks are not allowed more than eight, referred to Wenzhou "358" credit requirements. Each credit banks in the total credit of enterprise credit management, and guide enterprises to rationally control total external financing guarantees, bank achieve interaction, jointly controlled risk.

The formation of this indicator, in fact, is the industry risk guarantee chain crisis dismantling process of forming loopholes interception, but also reveals the nationwide proliferation of guarantee ring, Dangerous Love UNPROFOR formation logic.

For example, an annual sales income of less than 30 million businesses, banking personnel in order to facilitate mutual trade UNPROFOR, claiming its sales of over 100 million, for the establishment of mutual relations with other companies. "If the market is functioning fine, this is no problem, but now other funding strand breaks foot, and mutual insurance companies forcing banks to repay." Forming a mutual relationship with these companies business owners said.

Mutual insurance companies operating in good condition otherwise, but if you have lost a huge amount of mutual debt, is likely to get into trouble.

"Mutual, UNPROFOR and other security system itself is not the main problem, the real danger is more than their ability to excessive borrowing." One business owner said.

"Before the incident, a company in the end how much of the credit line, this is basically the interbank cynical. Wenzhou problem is particularly serious, some corporate assets but four or five million, but because the number of banks involved in the mutual lending of project, and finally got the hundreds of millions of loans. "Wenzhou, a state-owned bank executives told the 21st Century Business Herald reporter.

After the disposal of non-performing assets in recent years, this problem has become increasingly clear revealed, had the banks are buried business development, did not observe and analyze the specific business line of credit issues carefully. Thus, a variety of chaos in the opaque state continually growing. For example, some enterprises through the establishment of mutual insurance affiliates, UNPROFOR taking loans.

After the crisis, the surface looks good business, in fact, leveraged financing capacity expansion, massive outflow from bank loans, but not all of the flow of expanded reproduction or transformation and upgrading of enterprises, but most of the flow of the real estate, mining, futures and higher profit areas of usury speculative markets.

"Banks had not completely control the flow of credit." Profound sentiment aforementioned state-owned bank executives. "Wenzhou area and most of the domestic area compared to the amount of credit is often more than two times. Indeed, over-indulged corporate credit for capital investment splurge use."

Wenzhou, a local financial regulatory sources, the crisis just happened on the occasion, Wenzhou has had a survey, total plate 110 billion of private lending in Wenzhou, only 35% for the Industrial business, the other basically for speculation. "Once such speculative areas of the country to begin policy control, became squeezed speculative bubble."

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