This provides us with a better standing to promote

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Unformatted text preview: ppendix I). As Dr. Yang Kai-seng put in a presentation: "We have got the approval from the China Regulatory Commission to undertake securities business. This provides us with a better standing to promote state-owned enterprises' reform and realize the exit of our equity holding rights." In December 2000, Jiugang Hongxin went public with Cinda as the listing sponsor and associate stock underwriter. In November 2001, Great Wall sponsored Yu Taibai to be re-listed in the Shenzheng Stock Exchange. The AMCs' roles as listing sponsor and securities underwriter are controversial. If the policy could be applied properly, it would speed up the asset recovering process and revitalize the SOEs through market forces. However, there is also conflict of interest for an AMC to act as the equity holder and the listing sponsors or securities underwriter for the same SOE. Using the stock market listing as an exit strategy, the AMCs could possibly transfer their holding risks to the public investors. In the case of Yu Taibai, Great Wall AMC acquired 57.36% of the equity of the company through debt-equity swap in 2000. The company had been de-listed in Shenzheng Stock Exchange for two years due to successive losses in the prior three years. After the debtequity swap, the company went through a series of restructuring. In 2000, the company started to turnaround and even realized net earning of RMB 0.027 per share. In March 2001, the Great Wall AMC recommended Yu Taibai to be re-listed in the Shenzheng Stock Exchange and was approved by the CSRC. The extraordinary turnaround was accomplished through downsizing, asset restructuring, debt restructuring and tax refund. It is hard to tell now how sustainable these restructuring methods can be in keeping the company profitable in the following year. For Great Wall, however, the re-listing could be a very successful exit from this engagement if its holding shares could also be traded in the Stock Exchange. Discounted Payoff The SOBs are prohibited by law from accepting discounted payoff, but the AMCs are exempt from such restriction. Therefore discounted payoff has been one of the major NPL workout approaches for the AMCs. The AMCs have utilized all different means to force debtors to pay back at least part of the debt. For example, the debtor could be forced to dispose of some of its assets and use sale proceeds to pay back its loans; the AMCs could bring lawsuit against the debtor's defaulted borrowers or customers with deeper pockets and use their payments to pay back the debtor's loans; the AMCs could just waive the accrued interest and force the debtor to pay back the principal (Table 7). Table 7: Discounted Payoff Case Study - Huarong AMC Company Beijing Insulation Beijing Light Material Factory Automobile Shandong Lukang Pharmacy Group Company Location Outstanding Principal Accrued Interests Collateralized OPB Guaranteed OPB Industry Entity Agreed Recovery Cash Received Agreed Recovery % Cash Recovery % Resolution Method Beijing RMB 17.8 million RMB 0 milli...
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