Credit Slows With Private Credit Guarantee Firms Under Pressure in Sichuan

Yesterday's strong TSF growth has folks looking for a boost in credit, but for marginal borrowers credit remains tight. After the Largest Privately Run Credit Guarantee Firm in Sichuan Goes Bust, banks are reassessing their relationships and looking for government support. Government run credit guarantee firms are no solution because the anti-corruption drive has tightened credit at those firms. Furthermore, the subprime, doubtful and bad loans rates at one government firm comes to 40% of assets, leaving it severely impaired as well.

四川担保危机困局待解 多家银行清退民营担保

Sichuan security industry has a domino one was torn down.

The end of June, Sichuan Longchang County Eagle Financing Guarantee Co., Ltd. Chairman Xiaxiao Long running, Local 2000 families, hundreds of millions of private investment is difficult to payment; July 8, Land Credit Financing Guarantee Co., several executives lost contact; 7 May 13, 2011, and a large private security companies in Sichuan - Sichuan Shun Financing Guarantee Management Limited ("Shun Guarantee" below) were also caught in a great dilemma.

One investor told the 21st Century Business Herald reporter, from May to provide security Shun guaranteed by related P2P platform has stopped payment of principal and interest, July 13 to 14, Shun security official website announced multiple documents show Shun collateral management Shun layer has authorized the development and integration of emergency working group to take over the company, the working group of senior government Shun guarantee identity, accountants, lawyers and other seven members.

Meanwhile a job briefing also showed that Shun secured assets greater than liabilities, financial office is coordinating relevant departments at all levels to discuss promoting Shun guarantee part of the assets realized for the debt and guarantee obligations to fulfill.

Private financing cash crisis

Shun guarantee registered capital of 500 million yuan in Chengdu auto industry loan guarantees quite well known, and make it into trouble is its use of P2P platforms run by private financing.

According to informed sources, the number of investors involved more than 900 people on their own statistics, involving the amount billion. However, these data have not been officially verified, Shun refused to guarantee an interview of 21st Century Business Herald reporter.

Currently, local finance office is working with all levels of the Banking Bureau, banks communicate, trying to restore production capacity Shun guarantee and hematopoietic function. The local government also requires Shun secured private financing guarantees to actively communicate with customers, actively sought the party responsible for the project.

21st Century Business Herald reporter learned that the use of private finance company or other financing platform for private financing to maintain the security of customer financing needs, even directly from the melt, which is already an open secret in the security industry in Sichuan, the multi-event causes of the crisis from the security company also mostly lies.

"In the economic downturn, when there is no contraction of business; influx of private financing at the time played, and participated in the private financing." Commented a senior financial Chengdu, Sichuan, who in recent years security industry.

The multi-play security company involved in private financing has not cashed.

Eagle County, Sichuan Longchang guarantees, for example, which involves self-financing amounting to approximately 300 million yuan, chairman Xia Xiaolong foot Eagle has secured more than half its private financing payment problems difficult to solve, the local government nor the introduction of asset disposal program Only Longchang County Public Security Bureau issued a rational investor rights by requiring notice.

The actual control of the Land of guarantees and other executives lost to Yang Zhigang, more than 200 million private financing difficult to honor, investors told the 21st Century Business Herald reporter, Land of the guarantee is currently raising funds, but difficult.

Remittance guaranteed by a number of private finance companies also guarantee payment into trouble. A constant surplus Sichuan Investment Company 21st Century Business Herald reporter obtained documents show, Land of the senior secured lost to cause the platform to a variety of financial products difficult to honor, after consultation with employers and the asset management company and part of the investment banking firm of Sichuan constant surplus Two proposed payment schemes: one principal payment delay for two months, two months after the 10 working days according to 20% of each payment of principal, income in accordance with 5% annual yield payment; another investor willing to apply debt into equity, the borrower payment of 6% per quarter earnings, and promised to buy back equity investors in six months.

Banks repaying private security

Chengdu, a local bank, told reporters that the responsible person for private security companies, currently the bank is gradually repaying. This measure is clearly more than a bank, a number of shares of the row and the City firm also 21st Century Business Herald reporter expressed similar views.

Previously, "China Business News" reported that the Land of guarantees on June 26 joint 20 local Sichuan famous Sichuan financing guarantee company jointly presented to the Finance Office a copy of the "Report on the grim situation of private security agencies relevant circumstances" is named. The joint report states: "In response to the risk of private security system, I hope the relevant departments as soon as possible the introduction of appropriate measures; fair treatment of private security companies; strengthen judicial support to help guarantee companies to quickly recover; support private security agencies concerned should be encouraged to upgrade."

Although the local government does not want the private security industry into a corner, after the multi-guarantees from the crisis, apparently from the banks to control their risk areas, not in accordance with the wishes of the local government to continue to cooperate with the private security company.

"The economic downturn, more intense perception of SMEs to economic winter, and the risk of private security companies early accumulation is relatively high, resulting in today's situation, repaying the bank's private security is also quite upset." Told a local banking sector 21st Century Business Herald reporter.

In addition to private security companies stuck in a quagmire, the state-owned security company's business is also not good to do. "Sichuan official corruption, government programs do less, but the project was originally a government guarantee and some are stopped, the environment and the private economy is not good." One security company executives told reporters.

According to the relevant source told the 21st Century Business Herald reporter, "a large-scale state-owned Southwest guaranteed loan guarantee companies, special mention, substandard, doubtful and loss loans accounted for more than 40%."

And market acceptance of the guarantee business is declining, the performance of listed companies in the stock price continued to decline. Well-known security company in late June SNG Holdings listed in Hong Kong, through 18 trading days after its issue price of HK $ 1.62 from the price, fell to HK $ 1.5 on July 15, the end of the price stability of July 10 is the day fell 8.64 percent.