HSBC releases base metal pledged for US$30m loan to Zhong Jun Resources

Registry documents show lender released base metals that backed US$30m facility for Zhong Jun, a firm linked to Qingdao port scandal

PUBLISHED : Friday, 25 July, 2014, 1:35am
UPDATED : Thursday, 31 July, 2014, 6:46pm

HSBC has released base metals used as collateral for commodity financing by Zhong Jun Resources, according to Company Registry documents obtained yesterday.

Zhong Jun is controlled by Chen Jihong, the Singaporean national who owns Decheng Mining and has been detained for his alleged role in the commodity financing scandal in Qingdao where metal was allegedly pledged to several banks for billions of yuan.

The documents show that the Hong Kong branches of Standard Chartered and BNP Paribas also set up trade finance arrangements with Zhong Jun that were backed by aluminium and alumina.

The two banks have not been able to release the pledged metals, as HSBC did.

A spokesman for HSBC declined to comment on whether the release of the pledged metals means repayment by the company or a write-off of the debt.

Documents filed by Zhong Jun to the Company Registry show HSBC arranged banking facilities of up to US$30 million with the pledged aluminium, alumina and copper in December last year. The bank also set up trade financing agreements with Zhong Jun with pledged trade documents and deposit account in mid-2013.

Decheng Mining reportedly pledged the same stockpile of aluminium, alumina and copper at Qingdao port multiple times for loans.

Chen is also a director of Zhong Jun.

According to documents obtained from the Company Registry yesterday, HSBC released pledged metals, trade documents and the deposit account pledged by Zhong Jun on June 30, after the authority in Qingdao started an investigation into the metals financing scandal early last month.

Standard Chartered is suing Chen for US$35.6 million. It is the first lawsuit related to the Qingdao port metals fraud lodged in Hong Kong. The lender's commodity-related exposure in the Qingdao area was about US$250 million, it said last month.

The Company Registry documents show Zhong Jun is a corporate guarantor and Chen is a personal guarantor in a trade finance agreement arranged by Standard Chartered mid-2013, backed by "LME-grade of aluminium ingots or non-LME-grade aluminium bar of the same value".

The documents also indicate that the Hong Kong branch of BNP Paribas arranged a US$25 million facility for an alumina trade, also in mid-2013, with Zhong Jun as a guarantor and Chen as a personal guarantor. The time matches the trade financing activities arranged with HSBC and Standard Chartered.

BNP Paribas declined to comment on the matter.

Like Decheng Mining, the Hong Kong-registered Zhung Jun specialises in metals trading.