A 2.5 billion yuan debt "Gap Compensation Agreement" tied the fates of three listed companies, Xinchao Energy, ST Zhongjie and *ST Deao. Recently, the first-instance judgment of the financial loan contract dispute between Guangzhou Rural Commercial Bank and 18 defendants, including the three companies mentioned above, was issued, and the three companies were sentenced to bear debts of more than 1.5 billion yuan, and the company's stock may be subject to other risk warnings. However, the three companies did not admit it, and all of them intended to appeal.
Source: Photo Network
With more than 1.5 billion yuan of illegal guarantee debt, Xinchao Energy may face ST risk warnings
On February 8, 2022, Shandong Xinchao Energy Co., Ltd. (stock abbreviation: Xinchao Energy, stock code: 600777. SH) disclosed the company's involvement in litigation progress announcements. It is reported that the Guangzhou Intermediate People's Court made a first-instance judgment in the case of Guangzhou Rural Commercial Bank Co., Ltd. (hereinafter referred to as Guangzhou Rural Commercial Bank) suing a number of companies and natural persons, including Xinchao Energy, in which it was found that Xinchao Energy and Zhongjie Resources Investment Co., Ltd. (stock abbreviation: ST Zhongjie, stock code: 002021. SZ), DEAO General Aviation Co., Ltd. (stock abbreviation: *ST Deao, stock code: 002260. SZ) shall be liable for compensation for one-half of the debts that Huaxiang (Beijing) Investment Co., Ltd. (hereinafter referred to as "Huaxiang Investment") cannot pay off within the range of RMB1.586 billion, and shall bear the case acceptance fee and property preservation fee within the range of RMB7.98 million.
According to the relevant provisions of the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange, if the company is found to have violated the prescribed decision-making procedures by providing external guarantees (except for those whose guarantee object is a subsidiary within the scope of the consolidated statements of the listed company), the balance reaches more than 5% of the absolute value of the latest audited net assets, or the amount exceeds 10 million yuan, and the company's shares may be subject to other risk warnings.
According to the disclosure, the above matters involved the debt principal that Xinchao Energy may bear is about RMB1.594 billion, which is about 12.82% of the company's latest audited net assets. This means that if, within one month from the date of February 8, 2022, the issue of illegal guarantees cannot be resolved, The Stock of Xinchao Energy may be subject to other risk warnings, and the stock abbreviation will be marked as "ST".
However, for the illegal guarantee matters and judgment results, Xinchao Energy does not seem to admit it. It disclosed that after inquiring into the company's files, the company's files contained neither the original or copy of the "Gap Compensation Agreement" mentioned in the case, nor the original or copy of the agreement, legal documents and letters involving the provision of shortfall compensation for the trust products of Guangzhou Rural Commercial Bank. There are also no printed records of the above-mentioned "Gap Compensation Agreement" or other legal documents and letters involving the provision of shortfall compensation for the trust products of Guangzhou Rural Commercial Bank. In addition, upon enquiry into the archives of the Company's general meeting of shareholders, the Board of Directors and the Supervisory Board, the Company's General Meeting of Shareholders, the Board of Directors or the Supervisory Board has not considered the relevant proposals relating to the provision of a shortfall in the trust loan referred to in the case.
Xinchao Energy said that the company believes that there are a number of facts identified in the first-instance judgment and the application of law errors, and the company will appeal to the Guangdong Provincial Higher People's Court within the statutory time limit in accordance with relevant regulations.
Two other listed companies were involved in the "storm", and one risked termination of listing
On February 7 and 8, 2022, ST Zhongjie and *ST Deao also disclosed relevant announcements, the content of which is basically consistent with Xinchao Energy.
Looking at ST Zhongjie first, the Guangzhou Intermediate Court determined that Zhou Haitao, the then legal representative and general manager of ST Zhongjie, signed the "Gap Compensation Agreement" on June 27, 2017, exceeding the statutory authority, stipulating that ST Zhongjie would bear the obligation to make up the difference in the principal and interest of the 2.5 billion yuan debt under the "Trust Loan Contract" of Huaxiang Investment. The Guangzhou Intermediate People's Court ruled that ST Zhongjie should bear the liability for compensation for one-half of the principal, interest, penalty interest, compound interest and other debts of the trust loan that Huaxiang Company could not repay within the range of 1.586 billion yuan, and bear part of the litigation costs within the range of 7.9786 million yuan.
The above-mentioned illegal guarantee matters involving the possible principal amount of debt to ST Zhongjie are also about RMB1.594 billion, which is about 252.80% of the Company's latest audited net assets. If the issue of the illegal guarantee cannot be resolved within one month from the date of disclosure of this announcement, ST Zhongjie shares may also be subject to other risk warnings.
Similar to the attitude of the above-mentioned new wave energy. ST Zhongjie also disclosed in the relevant announcement that there is no original or copy of the "Gap Compensation Agreement" mentioned in the company's file. In addition, the Board of Directors or the General Meeting of Shareholders of the Company has not considered the relevant proposals relating to the provision of a shortfall in the trust loan referred to in the letter.
ST Zhongjie said that the company reported the case to the local public security organ on the matters involved in the obligation to make up for the difference, and the Yuhuan City Public Security Bureau has filed and investigated the case, and the case is still in the process of investigation. At the same time, after receiving the judgment of the Guangzhou Intermediate Court, the company is currently discussing the content of the judgment with the lawyer on behalf of the lawyer, and communicating whether to appeal and the appeal plan.
In addition, another listed company* ST Deao is also deeply involved, the company has suspended listing, or faces the risk of termination of listing.
On February 9, 2022, *ST Deao announced that on the evening of January 30, 2022, the Company received the First Instance Civil Judgment issued by the Guangzhou Intermediate People's Court, which showed that the Company had violated the guarantee, and ordered the Company and two other companies to bear compensation liability for one-half of the defendant Huaxiang Investment's unpaid debts within the range of 1.586 billion yuan, and part of the litigation costs within the range of 7.9786 million yuan respectively.
The above-mentioned breach of guarantee involves the possible principal amount of the debt that *ST D&O may bear is approximately RMB1.594 billion, which is about 201.68% of the Company's latest audited net assets. *ST Deao shares may be subject to further delisting risk warnings. *ST Deao said that the judgment of the lawsuit is a first-instance judgment, not a final judgment, and the company will appeal in the near future.
It is worth mentioning that due to the negative audited net assets in 2017 and 2018 for two consecutive years, *ST Deao shares have been suspended since May 15, 2019.
On February 7, 2022, *ST Deao received a notification letter from the company's sponsor for the resumption of listing, Fed Securities Co., Ltd. (hereinafter referred to as Fed Securities), which no longer provides recommendation services for the company to resume listing, and terminates the relevant agreement on "Part I Recommendation to Resume Listing" of the "Agreement on Recommending the Resumption of Listing and Continuous Supervision of the Entrusted Stock Transfer" signed with the Company.
As Fed Securities no longer provides recommendation services for the company to resume listing, *ST Deao suggested that the company may not comply with the requirements of the "Shenzhen Stock Exchange Stock Listing Rules (2018 Revision)" to comply with the resumption of listing application, resulting in the exchange failure to pass the review, the company's shares may have the risk of termination of listing.
Related borrowings have been questioned to have "beheading interest"
So, what is the situation with this huge debt of 2.5 billion yuan?
According to public information disclosure, on June 27, 2017, Guangzhou Rural Commercial Bank and Guotong Trust Co., Ltd. (hereinafter referred to as "Guotong Trust") signed the "Guotong Trust Huaxiang Investment Loan Single Fund Trust Contract", with a trust size of 2.5 billion yuan and an estimated term of 48 months, calculated from the date of establishment of the trust.
On the same day, Huaxiang Investment and Guotong Trust signed the Trust Loan Contract, and Guotong Trust issued loans of RMB1.5 billion and RMB1 billion to Huaxiang Investment on June 28, 2017 and August 3, 2017 respectively. The loan matured on 28 June 2021.
At the same time, Xinchao Energy, ST Zhongjie and *ST Deao signed the "Gap Compensation Agreement" with Guangzhou Rural Commercial Bank respectively, stipulating that no matter what the reason caused Guangzhou Rural Commercial Bank to fail to receive the investment principal or income agreed in the trust contract in full on the accounting date (including the interest distribution date, principal repayment date and trust early termination date) agreed in any trust contract, it shall bear the obligation to make up the difference to the bank.
On April 14, 2020, The State Communications Trust issued the Notice of Early Termination of the Single Fund of the State Communications Trust Huaxiang Investment Loan to the Guangzhou Rural Commercial Bank, and the State Communications Trust decided to terminate the trust in advance and liquidate it on April 24, 2020, and at the same time to complete the registration of the trust property in accordance with the relevant regulations.
Guotong Trust transferred the relevant information of the trust property to the Guangzhou Rural Commercial Bank and issued a written notice to the debtor of the creditor's change to guangzhou rural commercial bank. At the same time, the State Communications Trust issued a "Notice of Assignment of Creditor's Rights" to each debtor, requiring each debtor to directly perform the corresponding responsibilities to the Guangzhou Rural Commercial Bank. On May 6, 2020, CCC issued a Liquidation Report to Guangzhou Rural Commercial Bank, and CCC lifted its fiduciary responsibility to the trust.
According to the provisions of the Trust Loan Contract, Guangzhou Rural Commercial Bank announced the early maturity of the loan on November 3, 2020. Each debtor shall, in accordance with the provisions of the Trust Loan Contract and the corresponding credit enhancement documents, bear the responsibility of repaying the principal amount of the loan of 2.5 billion yuan, interest, penalty interest, compound interest, liquidated damages and other liabilities to Guangzhou Rural Commercial Bank. Huaxiang Investment's failure to repay the principal and interest on time constituted a breach of contract, and the remaining defendants failed to perform their corresponding contractual obligations, so Guangzhou Rural Commercial Bank filed a lawsuit.
The results of the first-instance judgment show that Huaxiang Investment shall repay the principal amount of the loan and interest, penalty interest and compound interest to Guangzhou Rural Commercial Bank within 15 days from the date of the legal effect of this judgment, with a total of 1.765 billion yuan of interest, penalty interest and compound interest as of November 6, 2020, and the sum of interest, penalty interest and compound interest calculated during the contract period shall not exceed the upper limit calculated on the basis of 2.5 billion yuan and calculated according to the standard of 24% annual interest rate. From 7 November 2020 to the date of actual repayment, penalty interest will be paid at an annual interest rate of 24% on a basis of $2.5 billion.
One thing to note is that according to the civil judgment disclosed by *ST Deao on February 8, 2022, this case involving many loan disputes also involves the issue of "beheading interest".
As the source party of the case, Huaxiang Investment argued in the relevant litigation that its company did not object to the legal relationship of the trust loan with the State Communications Trust. However, with regard to interest, penalty interest, compound interest and liquidated damages, Huaxiang Investment believes that it has exceeded the upper limit stipulated in Article 2 of the Several Opinions of the Supreme People's Court on Further Strengthening Financial Adjudication Work, that is, the borrower of the financial loan contract requests a reduction in the total excess of 24% of the total annual interest rate on the grounds that the interest, compound interest, penalty interest, liquidated damages and other expenses claimed by the lender at the same time are too high and significantly deviate from the actual loss. At the same time, Huaxiang investors proposed that, after calculation, as of November 6, 2020, the interest, penalty interest, compound interest and liquidated damages claimed by Guangzhou Rural Commercial Bank should not exceed about 860 million yuan. Regarding the liquidation of the State Communications Trust and the transfer of creditor's rights, according to the evidence submitted by the Guangzhou Rural Commercial Bank, in the process of serving the notice of early maturity of Huaxiang Investment, it was shown that Huaxiang Investment was in a state of refusal, so the specific content of Huaxiang Investment's liquidation and early maturity of the trust loan was not clear before the litigation.
The second point that Huaxiang Investment argues clearly shows that "there is a beheading interest in this case".
Source: *ST Deao Announcement
So, what follow-up impact will this case have on the above three listed companies? We will continue to pay attention.