New lifeline for ailing mainland firms
High-powered investment vehicle offers alternative funding sources and help in corporate restructuring
A group of large private mainland enterprises has formed an investment vehicle to provide their peers with alternative sources of funding and help them when they get into financial difficulty.
Guang-Tsai 49 Holdings was launched yesterday at a ceremony in the Great Hall of the People in Beijing by 52 private enterprises, including Hong Kong-listed food company Yurun, down jacket-maker Bosideng, Longwan Port, Taipingyang Construction, Changlian Oil and Nasdaq-listed internet company Sohu.
'Companies involved in the group must be leading companies in their field, they must be growing and they must be credible private enterprises,' Guang-Tsai 49 chairman Jin Huiqing said.
The group's primary role is to recapitalise and restructure private firms in financial difficulty with funds from members or money raised on capital markets.
Guang-Tsai 49 plans to establish a fund management and investment banking subsidiary in Hong Kong to raise funds to invest in troubled enterprises. It hopes to help companies list in the city as one way to recoup its investments, according to vice-chairman Xiang Hong.
Mr Xiang has first-hand experience of the difficulties of financing private enterprises. He was executive chairman of bankrupt and disgraced conglomerate D'Long from 2001 until it collapsed in 2004.
The state-owned banking sector still provides more than 90 per cent of corporate financing in China and private enterprises often complain of problems accessing capital, particularly when market conditions are down.
Most of the shareholding companies in the new group come from sectors facing swelling overcapacity and imminent consolidation as profits continue to shrink.
Another key role for Guang-Tsai 49 will be assisting its shareholders to consolidate their industries by buying struggling competitors and state-owned enterprises.
'The establishment of groups like this will help the restructuring, re-organisation and reform of state-owned enterprises,' said Xia Bin, director general of the Financial Research Institute, a government think-tank operating under the State Council.
Guang-Tsai 49 has high-level government support and is operating under the auspices of the United Front Work Department of the Communist Party Central Committee and the All China Federation of Commerce and Industry.
Hu Deping, vice-minister of the United Front Work Department and son of the reformist Hu Yaobang - whose death sparked the 1989 student demonstrations - was the guest of honour at yesterday's ceremony.
The group will have initial registered capital of 200 million yuan. It signed its first investment deals yesterday, including agreements with state-owned coal company Shanxi Resources Group and Feitian Group, which owns three mainland-listed petrochemical and industrial goods subsidiaries.