China’s would-be Rosneft investor CEFC pledges unit’s stock for loans amid funding woe

In September 2017, CEFC Shanghai was 51.3b yuan in debt repayable within 12 months, had 33b yuan in outstanding long term interest-bearing loans, 20b yuan in cash and deposits, and 55b yuan in shareholders’ equity

PUBLISHED : Sunday, 18 March, 2018, 6:31pm
UPDATED : Monday, 19 March, 2018, 12:11pm

CEFC Shanghai International Group, the principal subsidiary of troubled CEFC China Energy, has pledged close to a fifth of its holding in a Shenzhen-listed unit to back a 800 million yuan (US$126.4 million) loan – the latest sign the energy-to-finance conglomerate chaired by mysterious businessman Ye Jianming is under financial strain. 

CEFC Shanghai handed over 245 million shares of CEFC Anhui International Holding to custodian Anhui province-based Hua’an Securities as guarantee for the loan, on March 5, CEFC Shanghai said in a filing posted on the web-site of interbank financial products settlement services provider Shanghai Clearing House. 

The shares pledge, in favour of Hangzhou-based Wanxiang Trust, will last until June 6, and amounted to 17.7 per cent of CEFC Shanghai’s entire stake in CEFC Anhui. It means 31.9 per cent of the stake has now been pledged to lenders. 

CEFC Shanghai owns 60.8 per cent of CEFC Anhui, which had a market capitalisation of 12.2 billion yuan on Friday and net profit of 368 million yuan in 2016. 

“This shares pledge will not cause any major impact on the operation, financials and debt repayment capability of CEFC Shanghai,” it said. 

The filing comes after a Reuters report last week said Shanghai-based CEFC China was preparing to pay annual interest of as much as 36 per cent for short-term funding, in a sign of a cash crunch faced by the company as authorities were closing in on its chairman, who was being investigated for suspected economic crimes.

Ye has been detained for questioning by the authorities and CEFC China was taken over by municipal government-controlled investment firm Shanghai Guosheng Group, sources told the South China Morning Post early this month. 

CEFC Shanghai said reports that Ye was being investigated were “unfounded” and that its operation was “normal”.  

CEFC China has signed some US$12 billion worth of acquisitions since 2015, mostly in the energy and financial services sectors, including a US$9.1 billion purchase of a 14.16 per cent stake in Russia’s Rosneft, the world’s largest listed petroleum company, last September. 

Patrick Ho Chi-ping, Hong Kong's former Home Secretary who heads a think tank that is fully funded by CEFC China, was arrested on November 21 in New York on charges of routing bribes for African government officials through US financial institutions.

While CEFC China had denied Ho has anything to do with its operation, China Chengxin Credit Rating Group said in a March 8 statement, the incident had delayed the completion of the Rosneft stake acquisition, even though it had been approved by relevant authorities in China and Russia. 

Chengxin downgraded CEFC Shanghai’s credit rating from “AAA” to “AA+”, citing its high debt leverage and pressure to repay short term loans. 

At the end of September last year, CEFC Shanghai was 51.3 billion yuan in debt repayable within 12 months and had 33 billion yuan of outstanding long term interest-bearing loans.

It had 20 billion yuan of cash and deposits and 55 billion yuan of shareholders’ equity. 

Last December, a unit of state-controlled China Huarong Asset Management swapped its 3.6 billion yuan of loan owed by CEFC Hainan International into the latter’s shares, a filing showed.

CEFC Hainan is the unit that has agreed to buy purchasing the Rosneft stake, according to Chengxin.