China defaulter Chaori has 'four or five' trust loans outstanding
Shanghai Chaori Solar Energy Science and Technology has at least four outstanding trust loans due this year, the source said. The loss-making solar manufacturer failed to pay a coupon on a Rmb1bn (US$163m) bond last Friday, raising questions over its ability to meet its other obligations.
Chaori issued six trust loans in 2011, the source said. The first one, the Rmb80m China Industrial International Trust, was issued on April 21 2011 and matured on October 20 2012. This trust was backed by 5 million Chaori shares held by the company’s chairman Ni Kailu.
The other five financings were arranged by Zhongrong International Trust, with an annual interest rate at about 8.6% and a tenor of three years. The third trust loan comes due on July 31 this year, the fourth on September 5, the fifth on October 19 and the sixth on October 12, the source said, adding the information about the due date on the second trust loan was missing.
There was a cap of Rmb50m on each of the Zhongrong-arranged trust loans, which means the total of outstanding trust loans could amount to as much as Rmb250m. Those loans are most likely backed by shares, sources said.
A failure to honour any of those obligations could trigger a rare default in China’s booming trust market, broadening the impact of Chaori’s situation. A number of trust companies have struggled to repay investors – often including high-net-worth individuals – in recent months, including Jilin Trust, which failed to redeem at maturity in early February.
Chaori also owes 18 banks including China Construction Bank, Bank of China, and Agricultural Bank of China about Rmb1.7bn. These banks have been pressuring the Fengxian government – where Chaori is based – to help with a debt restructuring, according to a research report published by Bank of America Merrill Lynch on March 5.
China Securities, the arranger of the Rmb1bn five-year bond issued by Chaori in 2012, will send out a notice later today or tomorrow calling bondholders to a meeting where they will discuss proposals to resolve the default, according to a source from China Securities.
The Shenzhen-listed Chinese solar equipment producer was unable to make an interest payment on March 7 on the 8.98% bond due 2017, marking the first default on a public bond in China.
Trading in the company’s bonds has been suspended since last July after it recorded consecutive losses in 2011 and 2012.
