Caixin
Sep 11, 2020 05:21 AM
FINANCE

Sichuan Trust Still Can’t Repay $3.6 Billion Due Investors

Representatives of Sichuan Trust touting their products at a financial expo in 2016.
Representatives of Sichuan Trust touting their products at a financial expo in 2016.

Sichuan Trust Co. Ltd. still can’t repay 25 billion yuan ($3.6 billion) due investors, though it is scraping up hundreds of millions of yuan by liquidating assets and plans to sell its headquarters building and its stake in a securities brokerage, the troubled trust company said Thursday in an update for investors.

The southwestern China company failed to repay investors in a matured trust product in May, triggering a wave of protests. More than 8,000 individual investors were affected. In June, hundreds of investors came to Sichuan Trust’s headquarters in Chengdu to demand their money back but were told the company didn’t have enough funds to repay everyone on time.

At stake is money that investors put into the company’s “trust of trust” (TOT) products, which buy into other trust products that have invested in a wide variety of assets, including bonds, stocks, loans to private companies and local government financing vehicles. TOT products themselves are legal in China, but most of the underlying assets of Sichuan Trust’s TOT products turned risky. The company had to rely on funds from new investors to repay old investors, according to Zhou Bin, a deputy director of the provincial branch of the China Banking and Insurance Regulatory Commission (CBIRC).

Thursday the company said it has 900 million yuan in an account for all TOT projects and underlying assets and it expects to collect 800 million yuan more in the near term. Cash collectable by the end of this year is expected to total 4 billion yuan. The company said it has been speeding up the recovery of funds through strengthening collection, project restructuring, legal proceedings and disposal of assets.

The TOT projects account is under the control of regulatory authorities, and the company is unable to distribute the proceeds to investors, Sichuan Trust said in a statement. The company is communicating with regulators and expects to repay investors as soon as possible, it said. Sichuan Trust is refining a distribution plan in accordance with the principles of compliance and fairness and will submit it to regulatory authorities for approval, according to the company.

Sichuan Trust’s board and shareholders approved proposals to sell the company’s headquarters building and a stake in the brokerage firm Hongxin Securities Co. Ltd. The Hongxin stake is expected to be listed for sale on China Beijing Equity Exchange soon. Multiple institutions have come to Hongxin for due diligence, a person close to the brokerage said.

Some investors have also demanded that the government take over the trust company and its shareholders disgorge dividends to repay investors. Since its inception in 2010, Sichuan Trust has paid dividends of more than 900 million yuan to 10 shareholders, which include some state-owned companies, according to a person close the trust company. Dividend disgorgement is not easy, and no shareholder has made any comment on this issue, the person said.

In a meeting with investors Tuesday, Zhou said the takeover of a financial institution must meet certain conditions and go through approval procedures. Regulatory authorities are studying what to do next, Zhou said.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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