Wuyang Bond Intermediary Institutions have a difficult compensation game, and the compensation payment is only 250 million yuan, and the listing process of Debon Securities is affected

The Wuyang Bond Case is the first case of fraudulent issuance of corporate bonds in China, and the first case in China to apply the representative litigation system in the field of securities disputes. Some holders revealed that in the past 4 months after winning the lawsuit, the compensation landing game between holders and various intermediaries is still continuing, of which the first phase of Debon Securities has been in place for 200 million yuan.

Law firm debunks rumors of "650 million enforced"

Wuyang debt intermediary compensation is still in the game

The case of the false issuance of Wuyang bonds has become a milestone in the history of the development of the domestic bond market and investor protection. At the end of 2020, the first bond misrepresentation class action lawsuit in China was heard, and the court made a judgment on the bond issuer + intermediary: Chen Zhizhang, debon Securities and Daxin Certified Public Accountants, the actual controllers of Wuyang, paid a total of 740 million yuan, Dagong International compensated 74 million yuan, and a law firm in Shanghai compensated 37 million yuan. Specifically, law firms are jointly and severally liable for 5% of the principal and interest of the debt, and Dagong International is jointly and severally liable for the scope of 10% of the principal and interest of the debt.

However, according to the "Red Weekly" reporter from the Wuyang bond holders, the game between the two sides is still continuing. Recently, it was reported that "a law firm was enforced for 650 million yuan", and then the law firm retorted the rumor that the China Enforcement Information Disclosure Network mistakenly regarded the total compensation amount of each institution in wuyang bonds as the actual compensation amount of the law firm, according to the judgment, the firm should bear joint and several liability for the relevant losses of the wuyang bond holders within the range of 5%, and its various businesses are currently carried out normally, and the continuing operation of the law firm has not been substantially affected.

Mr. Xu is one of the holders of Wuyang Bonds. He told the "Red Weekly" reporter, "Wuyang two bonds, principal plus 3 years of interest, a total of about 1.6 billion yuan." Mr. Xu also said that the 650 million yuan compensation is for most small and medium-sized investors and a small number of institutional investors, and the remaining institutional investors need to pay additional compensation. Despite winning the lawsuit for more than a year, the compensation landing is still full of ups and downs. "The compensation has not been in place, we have filed a request with the court, and in mid-December 2021 we will be able to file a case."

"Among these four institutions, Deppon is the most economically powerful." At the end of December 2021, under the coordination of relevant departments, small and medium-sized investors and a number of intermediary institutions held a meeting and finalized some compensation plans. "At present, Debon Securities has compensated about 200 million yuan for the first phase, which has been put in place."

As for Dagong International, he revealed that the relevant person in charge of the other party admitted that in the past two years, the Business of Dagong has been sluggish, and the revenue is indeed not very good, "at present, only 1.5 million yuan has been compensated."

Daxin Certified Public Accountants, as an auditing institution, issued false audit reports, failed to exercise due diligence, and was materially at fault for the issuance and trading of Wuyang bonds. Daxin said, "Because it is a special limited partnership system, the first phase can only compensate 45 million yuan." "Tianyan's investigation shows that the capital contribution of Daxin Accounting Firm is 49.2 million yuan. However, Mr. Xu revealed that Daxin Law Firm had insured insurance institutions, and "Daxin can also apply for compensation from insurance companies in the future, which can reduce its own losses."

In contrast, communication with law firms is tricky. Mr. Xu said that the law firm only agreed to compensate about 1.5% in the first period, corresponding to about 9 million yuan in cash, and the actual compensation was 10 million yuan. "By mid-January, the total amount of compensation was about 250 million yuan."

He revealed, "According to the court's requirements, the intermediary institutions of Wuyang Debt must put the remaining funds in place or give a clear repayment plan before the end of January." Based on this, the cash repayment ratio of investors is about 37%.

Escorted by a number of well-known institutions

Two sci-tech board projects are still rejected

Mr. Xu said that the law firm that provides legal services for Wuyang Bonds is a major firm in the industry and has a high reputation in Shanghai. It also performed well in the capital markets business area. According to Wind, as of now, there are about 120 IPOs provided by the law firm, and there are many reserve projects. Last year, the number of IPOs undertaken by it was second only to Guoco Andes and Zhong Lun, reaching 53, accounting for about 1/10 of the total number of A-share IPOs last year. In addition, among the 10 IPO companies to be reviewed last week, Xuantai Pharmaceutical, Wufangzhai and Hongying Intelligence chose to cooperate with the law firm, and all of them passed the meeting.

Moreover, among the members of the 18th NDRC, it also includes Lee and Kim, a member of the executive committee of the firm's headquarters and a senior partner. However, in December last year, the CSRC adjusted the composition of the NDRC, and Li and Jin were no longer members of the NDRC.

The firm is not undependent, with several IPOs rejected or terminated last year. For example, Fries Technology, the company plans to list on the Science and Technology Innovation Board, but due to large fluctuations in performance, and the rationality of the company's fundraising projects, the total amount of income tax expenses continues to be negative, etc., the exchange has paid close attention to.

Among them, the NDRC focused on three inquiries, asking Fries technology to explain the reasons and rationality of the issuer's choice to enter the commercial vehicle field in the context of the rapid advancement of passenger car electrification in the Chinese market, and whether there is any significant uncertainty in the conversion of the agreement signed with Geely Commercial Vehicle into an actual order. Based on the above reasons, the listing review of Fries Technology was finally terminated.

In addition, in 2021, the first single rejection of the science and technology innovation board - Kangpeng Technology is also provided by the law firm. The Listing Committee of the Science and Technology Innovation Board believes that there are many administrative penalties for Kangpeng Technology and its subsidiaries, frequent safety accidents and environmental protection violations, resulting in the suspension of work and production of important subsidiaries, which in turn leads to a sharp decline in the company's important business and operating performance. In addition, the performance of Kangpeng Technology is also fluctuating, from 2018 to 2020, the revenue is 710 million yuan, 690 million yuan and 630 million yuan, and the net profit in the same period is 320 million yuan, 140 million yuan and 92.61 million yuan, respectively, with an obvious downward trend.

It is worth mentioning that the sponsoring brokers of the above two projects are Haitong Securities and Huatai United Securities, and the accounting firms are PwC Zhongtian and KPMG, plus AllBright, which can be called "golden partners" as a whole, but they still failed to succeed in impacting the IPO.

The listing of Debon Securities has a bumpy road

Debon Securities also has a listing plan, but due to the impact of the Wuyang bond incident, the IPO process has not been smooth. In July last year, the Shanghai Securities Regulatory Bureau announced that "Debon Securities decided to terminate the original stock issuance and listing plan", and Haitong Securities also terminated the IPO counseling work that had lasted for Debon Securities for four years. At that time, debon relevant people explained to the media that the company was in close communication with several leading securities companies and would continue to promote the listing in the future.

According to the "Red Weekly" reporter, Debon Securities is good at investment banking, asset management and other businesses, but under the current pattern of Hengqiang, a strong man in the securities industry, revenue is also shrinking. According to the annual report, the net fee and commission income of Debon Securities decreased from 643 million yuan in 2019 to 479 million yuan in 2020, of which the investment banking business revenue was 180 million yuan, a year-on-year decrease of 27%.

The decline in investment banking revenue of Debon Securities in 2020 is also related to the impact of the Wuyang Bond Incident on the company's bond issuance business

As for the brokerage business, Debon Securities currently has 29 branches and sales departments, of which there are Beijing branch and Chaoyang North Road business department in Beijing. Publication materials obtained from the Beijing Securities Association show that the revenue of Debon Chaoyang North Road Business Department in the first three quarters of 2021 was 8.39 million yuan, a slight increase year-on-year, but the net profit was a loss of 1.96 million yuan, and the loss was wider than the same period in 2020.

(The individual stocks mentioned in the article are only examples and are not recommended for trading.) ）

This article originated from Red Magazine Finance