Caixin
May 24, 2018 05:06 AM
FINANCE

CYTS Tours Unit on Brink of Default

Four trust companies have been affected by a default of Beijing Gold Trading. Photo: VCG
Four trust companies have been affected by a default of Beijing Gold Trading. Photo: VCG

Several financial institutions including Citic Trust were affected by the default of a unit of state-owned China CYTS Tours Group, reflecting heightened financial pressures on companies amid the central government’s deleveraging campaign.

Caixin learned from sources that Beijing Gold Trading Center Co., a gold exchange operator, failed to repay several trust products and loans from banks and insurance companies. The defaulted trust plans were issued by four trust companies including Citic Trust.

Beijing Gold Trading is another government-linked company recently exposed as facing default risks, indicating the extensive impact of Beijing’s efforts to reduce corporate leverage. Last week, a business controlled by a city government in Inner Mongolia reportedly failed to repay nearly 4 billion yuan ($626 million) of loans.

Beijing Gold Trading is 66.9% controlled by China CYTS Industrial Co., a subsidiary of the central government-owned tourism conglomerate CYTS Group. CYTS Group didn’t comment on the matter.

The total amount of Beijing Gold Trading debt that is on the brink of default is unclear. But according to a notice issued by Citic Securities warning investors of risk, Beijing Gold Trading failed to repay a 545 million yuan trust product issued by Citic Trust as of early May.

The product, set up in May 2017, was designed to raise as much as 1 billion yuan to invest in debt for Beijing Gold Trading. But as Beijing Gold Trading failed to repay the first tranche of the loan that was due May 4, Citic Trust said it will not issue the rest of the loan to the company.

Ping An Trust, an arm of Ping An Insurance, is the investment adviser on the product.

Caixin learned that CYTS Industrial has provided guarantees for Beijing Gold Trading’s defaulted trust products, but the parent is also under financial strain for making repayment.

Sources close to CYTS Industrial said the company has been under debt pressure since the beginning of this year as most of its borrowings consist of short-term loans. The company has used short-term debt to fund long-term investments, sources said.

CYTS Industrial’s capital strain worsened in April after it was blacklisted by the central bank for an irregular loan to Hengfeng Bank, a commercial bank rattled by investigations over opaque capital flows. A number of banks have since pulled back on lending plans with CYTS Industrial, a source said.

Company data showed that as of the end of 2017, CYTS Industrial had total assets of 102.8 billion yuan with liabilities totaling 56 billion yuan. The company posted revenue of 106 billion yuan and net profit of 4.4 billion yuan in 2017.

In an effort to ease default concerns, CYTS Industrial said in a letter to the trust companies that it has secured a 1.1 billion yuan bank loan and is in talks with Tianan Property Insurance Co. for a 4 billion yuan loan to be issued by the end of this month. The loan from Tianan Property is pending regulatory approval.

Contact reporter Han Wei (weihan@caixin.com)

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