The liquidators and creditors of Guangdong International Trust and Investment Corp (Gitic) are chasing hundreds of millions of US dollars in assets despite a recent decision by the Guangdong Higher People's Court to end the company's four-year bankruptcy proceedings.
Sources have told the South China Morning Post that the continuing saga is focusing on local government guarantees of bad loans made by Gitic across Guangdong province.
While the high court declared such guarantees illegal and therefore unenforceable, it also ordered local governments to pay creditors special 'Gitic compensation fees' equivalent to about 50 per cent of the nullified guarantees.
One creditor who has seen a list of the local governments concerned said that most, if not all, hailed from Guangdong. However, many are either unable or unwilling to pay the compensation fees ordered by the court.
One liquidation committee source said that while the total amount of these outstanding fee payments was 'still fluctuating', they could reach as much as US$360 million - or about 15 per cent of court-recognised claims against Gitic. If this money were recovered by creditors - including Citicorp, Hang Seng Bank, Sumitomo and UBS - it would more than double their recovery rate, which now stands at 12.5 per cent.
Gitic was closed by the central government in October 1998 with total liabilities of US$5.6 billion. However, only about US$2.4 billion of the claims against Gitic were later deemed valid by the court.
Last Friday, the liquidation committee officially informed creditors that a third repayment would be authorised later this year, bringing the total amount of money recovered to US$305.5 million.
