China Huishan, which owns the biggest number of dairy farms in China, said it plans to raise 750 million yuan through pledging 40,000 of its cows as collateral, while admitting a similar scheme in April ended in failure. The northeastern Chinese dairy giant listed in Hong Kong said on Sunday it agreed to collateralise about 20 per cent of its herd for loans at an annualised interest rate of 6.2 per cent, according to a filing to the Hong Kong stock exchange. It is the second time the raw milk producer surprised investors by turning to its biological assets, 40,000 cows that it estimates are worth 1.55 billion yuan, into collateral, after it declared in the same filing the failure of the first finance lease agreement under similar terms. In April, it negotiated a deal that would have seen it sell about 50,000 cows to lender Guangdong Yuexin Finance Lease Company for 1 billion yuan, and then lease them back. However, that deal eventually fell through. This time, Huishan has negotiated pacts with Ying Hua Finance Leasing, backed by China Financial Leasing, and China Wood, and is obliged to pay the financial firm an annualised interest rate of 6.2 per cent with a lease term of five years – the same terms stipulated in the first financial lease agreement with Yuexin. “As the company is reformulating its plans with respect to finance lease arrangements, the first finance lease agreement did not proceed to become effective,” Huishan said in the statement. In June, Ge Kun, Huishan’s executive vice president, told media that the company planned more “innovative financing tools in the future, where appropriate”. Faced with a tough fundraising environment, many Chinese companies resort to innovative asset-backed loans to raise capital, but it is rare for a major dairy company to pledge living animals for financing. Amid declining raw milk prices, the dairy farm operator has ventured into selling ultra-high-temperature(UHT) milk to consumers to sustain growth, but has faced stiffer competition from both foreign and domestic rivals such as Mengniu Dairy in the already crowded UHT market segment.