Banking & Finance

Huishan chairman Yang Kai dumps Jiutai Bank shares to raise cash after own stock crash

Yang pared his 16 per cent stake in Jiutai Bank to 4 per cent in the span of three weeks to raise HK$423 million, after his own company’s stock plunged.

PUBLISHED : Wednesday, 19 April, 2017, 2:44pm
UPDATED : Wednesday, 19 April, 2017, 10:48pm

Yang Kai, the second-wealthiest businessman of northeastern China of 2016 and operator of the country’s biggest dairy farm, has been dumping shares of a Hong Kong-traded bank over the past three weeks, after his Huishan Dairy defaulted on debt.

Yang pared his 16 per cent stake in Jiutai Rural Commercial Bank to 4 per cent in five transactions valued at HK$423 million (US$54 million) over three weeks, according to disclosures with the Hong Kong Stock Exchange.

“He is now desperate for cash, probably to fill the debt hole, or to meet margin calls,”said Shen Meng, an executive director with Beijing-based investment bank Chanson & Co.

Yang’s cash woes began in late March, when he met more than 20 of his creditor banks to plead for time to restructure an estimated US$5.8 billion in debt, and to raise fresh capital. While some of the banks agreed to give him a breather, disclosure after the meeting drove Huishan’s stock price into an 85 per cent plunge, wiping US$4 billion off his company’s market value.

Huishan Dairy loses two more directors, leaving its chairman as only board member

The company subsequently defaulted on US$200 million of bonds, and revealed that its treasury chief had suddenly become “unreachable.”

Yang’s troubles didn’t stop there. One by one, his directors and executives hit the exits, leaving him as the sole member on the company’s board, and falling below the minimum required under Hong Kong’s listing rules.

Five of Huishan’s directors said they wanted to focus on other commitments, while one said he was recovering from a heart surgery. Every board member noted that “there are no other matters in respect of their resignation that need to be brought to the attention of the shareholders of the company.”

“Regulators in Hong Kong ought to amend their rules by asking directors to better explain their reasons for resignations, especially when a company is in chaos,”said Louis Tse, a director with VC Brokerage. “Otherwise, shareholders are easily left in the dark when something happens that could potentially jeopardise” the business, he said.

Yang, 60, had pledged almost all of his entire 72 per cent stake of Huishan as collateral for loans either to the company, or to fund his personal ventures , according to Hong Kong’s Central Clearing & Settlement System (CCASS) records. That means if Huishan’s share price drops by a certain percentage, Yang must top up his collateral by either depositing more cash, or add more stocks.

How the debt bubble burst for China’s Huishan Dairy

That requirement is weighing on Yang, after a Shanghai court froze many of his assets in late March at the request of Gopher Asset Management, one of nearly 70 creditors beating on Huishan’s door.

Yang was the largest shareholder of Jiutai Bank, with 16 per cent held through his investment unit Champ Harvest. Jiutai, based in northeastern China’s Jilin province, is also Huishan’s largest creditor after Bank of China, with 1.83 billion yuan of loans to its largest shareholder’s company on its books.

Jiutai’s shares fell by a record 8.7 per cent to HK$4.82 on March 27, after Huishan’s stock plunge. It rose to HK$5.25 on Wednesday. Trading in Huishan’s shares remains halted.

Better known for his nimble skills in asset manoeuvring, Yang also ventured into real estate business as the developer of a luxury villa compound named Shangri-La in Liaoning’s capital city of Shenyang. The project was completed in 2011, though dozens of the lavish residences there are still vacant and are up for sale by the developer, according to Leju, a real estate portal.