China’s Sichuan Trust Is Latest to Miss Payments in Trust Market
China’s Sichuan Trust Is Latest to Miss Payments in Trust Market
(Bloomberg) -- Sichuan Trust Co Ltd. has missed payments on trust products, in a further sign of growing risk in the $3 trillion Chinese market for alternative funding for companies unable to access regular bank loans.
The Chengdu-based company, backed by the Sichuan regional government, failed to make payments of 40 million yuan ($5.6 million) this month, according to a filing by Hangzhou Boiler Group Co. on Tuesday. Hundreds of other investors also gathered to protest at the company’s headquarters to demand missing payments, local media Caixin reported. Sichuan Trust declined to comment.
The assets now facing default are trust of trust vehicles, which are invested in other trust instruments. The firm’s top management, including Chairman Mou Yue and Chief Executive Officer Liu Jingfeng, have met with investors and assured them they would work out the issue, Caixin reported, citing a video obtained by the newspaper. The total amount overdue wasn’t disclosed.
The once fast-growing shadow banking sector is being roiled by a slowdown in China’s economy and the impact from the coronavirus lockdown. The industry faces trillions of yuan in trust offerings -- high-yield products backed by loans that are sold to banks, institutional investors and wealthy individuals -- coming due this year.
Last year a record 118 trust products went into default, a number that is estimated to rise this year. The country’s 68 trust firms count property developers, manufacturers and local government financing vehicles among their biggest borrowers.
The climbing defaults of the sector have already prompted state rescue. Anxin Trust Co., a particularly aggressive shadow lender, said in March the government had been involved in its rescue plan to avoid triggering “systemic financial risks.”
More than 1,500 trust products with a value of 577 billion yuan were designated as risky at the end of last year, according to the China Trustee Association, up from about 870 a year earlier.
©2020 Bloomberg L.P.
With assistance from Bloomberg