China Cinda denies providing capital support to troubled food conglomerate Xiwang
The companies are in talks but no agreement on financial support has been reached, says assistant president Chen Yanqing
Xiwang Group, the troubled conglomerate whose shares plummeted after reports that it is exposed to a company which has defaulted on billions of yuan of debt, has not yet been offered financial support by China Cinda, according to a senior executive at the bank.
“We have been talking with Xiwang, but no agreement has been reached yet,” Cinda’s assistant president Chen Yanqing told the South China Morning Post on Friday. “If there is confirmation of new financing for Xiwang, we would put up a filing on the Hong Kong bourse’s official website.”
Chen’s denial follows mainland media reports that Cinda, one of China’s big four bad loan banks, had agreed to offer 6 billion yuan worth of funding to Shandong-based Xiwang, a food and industrial giant.
Xiwang Group’s subsidiary Xiwang Foodstuffs is listed in Shenzhen. Its share price plummeted by its daily limit of 10 per cent on Wednesday morning, after media reports that the company was having trouble guaranteeing loans worth billions of yuan for another local firm, Qixing Group.
Qixing Group is reportedly suffering from a break in its cash chain, defaulting on more than 7 billion yuan of debts. Analysts worry the debt default will spark a chain reaction that will effect local companies, as they tend to cross-guarantee each other’s loans.
China Business News reported on Thursday, quoting Xiwang, that Cinda has agreed to offer one billion yuan of operating capital and 5 billion yuan of funding to handle the Xiwang’s cash crisis.
Xiwang Foodstuffs resumed trading on Thursday morning and was down 4.7 per cent at 19.47 yuan in Shenzhen at 1.15pm.
Xiwang Group also controls two Hong Kong listed companies, namely Xiwang Steel and Xiwang Property.
Chen said both Xiwang Group and Qixing Group were their clients, but investments to date did not exceed 1 billion yuan, making their exposure to risk “controllable”.