China’s CEFC scrambles for loans as authorities swoop

HONG KONG: CEFC China Energy, the once-acquisitive conglomerate, was prepared to pay annual rates of as much as 36% for short-term funding in a sign of the cash crunch faced by the company as authorities were closing in on its chairman, according to multiple people with knowledge of the matter.

Earlier this month it was revealed that Ye Jianming, the company’s chairman, had been investigated for suspected economic crimes.

Guosheng Group, an investment firm owned by the Shanghai government, was tasked with evaluating CEFC’s financial position as part of a restructuring and takeover process, according to two sources with knowledge of the moves.

But from at least the second half of last year CEFC was approaching shadow bankers – non-traditional lenders – for costly short-term loans, said six sources with direct knowledge, in a sign of the strained liquidity the company was facing.

In early January, CEFC borrowed 1 billion yuan (US$158mil) from the Shanghai-based Bida Holding Group, also known as U.Trust Holding Group, for a 15-day loan with a daily interest rate of 0.1%, equivalent to an annual interest rate of 36%, said one person with direct knowledge of the matter.

The company also approached Shenzhen Qianhai Everbright Financial Holding Investment Management, Zhejiang-based Wanxiang Trust and Hebei-based Bohai International Trust, a unit of HNA Capital, for expensive loans, said people with direct knowledge of each respective company. Qianhai Everbright and Bohai International Trust were tapped for M&A funds to finance deals, while Wanxiang was approached for money for corporate financing.

None of the companies lent to CEFC for reasons ranging from concerns over liquidity and opaque ownership to difficulties appraising asset value and timing issues, trust sources said. The rates of interest discussed was unclear. However, annual rates on shortterm trust loans could be as high as around 12%, the sources said.