China economy

Boss vanished, bond plan aborted, assets frozen: China’s private oil giant awaits unknown fate

Private conglomerate reportedly gives up on bond issuance, as creditors review exposure

PUBLISHED : Tuesday, 03 April, 2018, 8:49pm
UPDATED : Tuesday, 03 April, 2018, 11:52pm

The future of troubled CEFC China Energy is looking even more precarious, after its main subsidiary has reportedly given up on a bond issuance, assets of its affiliated firms were frozen, and a major rating agency downgraded its main unit.

The private conglomerate took the world by surprise after it emerged as the buyer of a 14 per cent stake in Russia’s state oil giant Rosneft for US$9.1 billion, a deal that was subsequently delayed.

Its chairman and founder Ye Jianming has also disappeared, after the Czech authorities said in a statement last month it was investigating him for “suspicions of law violation”.

A source familiar with the matter told South China Morning Post that Ye had not been arrested, but that he was assisting the authorities in China with inquiries. Ye was also trying to keep a low profile, the source added.

The influential Chinese magazine Caixin reported that Ye was being probed, but that report was later taken off its website, after China CEFC claimed it had factual errors.

Ye rapidly built a business empire worth 263 billion yuan (US$43 billion). However, the official Beijing News reported on Tuesday that CEFC Shanghai International – a key CEFC Energy subsidiary – had now halted a plan to issue 5 billion yuan worth of bonds designated to investors, blocking the one remaining channel that could have provided it with much needed cash.

Mystery tycoon Ye Jianming under investigation in China, Czech presidential office says

That came just days after China Chengxin Credit Ratings downgraded its rating on CEFC Shanghai, citing the company’s worsening ability to secure funds, just as 10.1 billion yuan worth of debts are due to mature at the end of 2018.

China Securities, the brokerage house acting as trustee for three batches of existing CEFC Shanghai bonds, also said in a report to the Shanghai Stock Exchange on Tuesday, that 1.3 billion yuan in funds held by Shanghai CEFC Financial Holdings, another CEFC unit, had now been frozen by a court in Henan. 

CEFC Shanghai is also being sued by a branch of China Everbright Bank for an undisclosed amount of money, its added. 

According to public filings by other bond trustees, CEFC Shanghai has conducted at least 19 loan deals based on collateral assets, of which seven were signed with China Development Bank.

It secured 5 billion yuan in loans from China Development Bank on March 30, for instance, using its equity stake in the Hainan CEFC International Oil as collateral, a day after it secured 5 billion yuan in funding from China Development Bank, based on an equity stake in the CEFC Shanghai Industrial Equipment, another subsidiary.

China courts freeze CEFC’s shares, casting doubt on future of would-be Rosneft investor

A day later, CEFC Shanghai used its “paid-up capital” in subsidiary Hainan CEFC Holdings to secure 8.7 billion yuan from China Development Bank.

CEFC Shanghai also borrowed 5 billion yuan from five individuals on March 2, using its equity stake in Shanghai CEFC Financial Holdings as collateral, according to the filings. 

China Development Bank, the troubled conglomerate’s biggest lender, convened a creditors’ meeting on Monday to discuss its mounting debts, Reuters reported on Tuesday. 

The state bank advised creditors not to file any further lawsuits and also asked them not to recall loans to the group to help it maintain normal operations, Reuters added, citing unidentified sources.

The actual financial picture of Ye’s business empire remains unclear. 

According to a consolidated balance sheet released by Shanghai CEFC to the Shanghai Clearing House, its total liabilities were 128 billion yuan as of the end of September, although there was no detailed breakdown of its creditors.

Its troubles began to emerge in November, when former Hong Kong home secretary Patrick Ho Chi-ping – who worked for a think-tank affiliated with CEFC – was arrested in New York on charges of conspiring to bribe African government officials through US financial institutions. 

CEFC China said in a statement after the arrest that the fund had no ties to CEFC’s commercial activities.

At the same time, CEFC dropped its bid for a 50 per cent stake in J&T Finance Group in the Czech Republic. CEFC holds a 9.9 per cent equity stake in J&T Finance, and the company announced in October that it planned to increase that to 50 per cent.