Kunlun Trust Development Research Weekly Information No. 175

Research Results
2014/11/04 15:24


Trust companies M & A business: three major models

After the rectification and cleaning and business compliance, the trust industry chose the mortgage-based model and once absent from the M & A market. From 2010, Bohai Trust issued the "Nanling Huaye M & A Loan Trust" until September 2014, The industry only 45 M & A product distribution. In April 2014, Circular 99 issued by the China Banking Regulatory Commission proposed six transformation directions, one of which is "Encouraging M & A Business, Actively Participating in M ​​& A and Restructuring of Industry, and M & A Business Starts to Re-enter the Horizon of Trust Company."

Model One: M & A loans

Among the 45 M & A products since 2010, 11 were named after M & A loans. In this model, the trust did not intervene in the entire M & A process and the business model was most similar to the real estate and infrastructure business of the trust company. Just to meet the bulk of the funding needs of the main acquisition. From the perspective of counterparties, acquirers of M & A transactions tend to be more powerful, usually with bank loans or even debt issuance, with much lower interest rates than trust financing. And bank loans can put three or five years, with the entire merger process. In contrast, the trust M & A loans do not have much advantage, high cost of funds, short duration, the need to roll distribution. Therefore, mergers and acquisitions projects are generally financed funds chain is really nervous to find a trust.

A typical case is CITIC Trust's "M & A Lending Trust for Guangzhou No. 1 Dyeing Factory" established in 2012 by CITIC Trust. The trust plans to raise 600 million yuan to grant loans to Guangzhou Chuangda Investment and Development Co., Ltd. for a term of 3 years with a yield of 10.8 % To 12.5%, loan funds for the acquisition of Guangzhou First Dyeing Co., Ltd. 65% stake. The financing side Guangzhou Chunda is a subsidiary of Hopson, a well-known real estate developer. The main methods of risk control are mortgages: 239498.29 square meters of state-owned land use rights in Zengcheng, Guangzhou, 13 villas in Pudong New Area, Guangzhou, Zhujiangdi King Court construction area of ​​38,211.99 square meters under construction; the same time, Guangzhou Pearl River Overseas Chinese Real Estate Co., Ltd. and Hopson Development Group Co., Ltd. to provide joint responsibility guarantee.

Mode 2: Local participation

The second model can be called "partial participation": the trust company set up a collective trust plan to buy the underlying assets directly; after a period of ownership, the asset or trust beneficiary is transferred to the actual acquirer to exit. Local participation in the trust plan will generally be structured design, sub-priority, ordinary investors buy priority, the inferior level by the risk appetite of investment institutions (such as private equity funds) or buy-side buy; underlying assets General entrusted to the acquirer management. Such a business advantage is that the acquirer can obtain the management right of the assets with a small amount of capital (even without any capital contribution) in the early stage, while the risk is that the trust plan must really hold the project. If the inferior investors and acquirers can not follow the contract, Then there is the possibility of triggering a redemption risk. At the same time, most of these projects do not have land, real estate and other mortgage pledges, the trust company must have a considerable understanding of the industry and control ability.

The "B Cement M & A Project" issued by CCTD is a typical partial participation model. Its goal is to help a group A of a Hong Kong listed company to acquire its assets, subject to the designation of a cement project in Shaanxi. CCTD has set up a collective fund trust plan to raise priority funds to investors and a private equity investment fund to raise inferior grade funds, the latter also promised to long-term transferee priority investors trust benefits.

In terms of local participation, how to find counterparties can refer to the experience of mergers and acquisitions fund. Domestic mergers and acquisitions fund for partial participation in the project's typical practice is to look for mergers and acquisitions of listed companies, a small part of the funds from listed companies, the fund to help raise a lot of money, a joint venture to set up a subsidiary; and then from the industry to find the most 20 to 30 Potential enterprises, each with a 5% stake, observe the internal operation of the invested enterprises and export management techniques. After the investment value added, most of the investments are sold. One or two of the best ones will be incorporated into the listing platform. For listed companies, there are at least three benefits: First, to expand the influence of the industry; second, to get a more complete understanding of the industry; third, to acquire potential competitors.

Mode three: direct mergers and acquisitions

Trust companies to raise funds directly involved in mergers and acquisitions, the equivalent to bear the whole process of risk, but its benefits are able to get the hands. For projects that have a certain exit path and approach, direct participation in M ​​& A shows the trust company's ability to control certain industries and projects. At the same time, trust companies with special shareholder background may conduct some mergers and acquisitions to help the main industry.

Currently the trust product closest to the direct M & A mode is the "Fuzhou Red Star Equity M & A Fund Trust Plan" issued by 2014. The trust plans to raise 700 million yuan to take over the Fuzhou Red Star Macalline Expo Home Plaza Co., Ltd. The underlying trust Companies registered capital of 50 million yuan, more than two hundred million liabilities (mainly for the original shareholder loans), real estate projects on hand need to be revitalized. Raised funds are taken in four steps to take over the subject: first buy the underlying company 51% of the shares; and then increase the capital of the underlying company, the proportion of shares increased to 91%, the basic completion of equity control; the third step to buy the underlying company's equivalent Creditor's rights, liquidation of liabilities; the fourth as a shareholder of the company to the subject of additional shareholder loans. After the purchase of shares, capital injection, debt collection, borrowing, the underlying company has to meet the "432" requirement, sufficient funds to develop the project in hand.

Macro situation

State Department: Release Opinions on Strengthening Local Government Debt Management

On October 2, the State Council issued its opinion on strengthening local government debt management. Opinion pointed out that giving local governments a modest right to debt, the use of government bonds, no revenue-generating public welfare undertakings do require the government to borrow general debt, issued by local governments general bond financing, mainly to the general public budget revenue to repay; have a certain income Of the nonprofit career development needs the government to borrow special debt, by the local government through the issuance of special bond financing, with the corresponding government funds or special income to repay. Local governments can not borrow excess debt, can not be used for recurrent expenditures, government debt as a hard index into the performance evaluation.

Central Bank and China Banking Regulatory Commission issued notice on further improving housing finance services

On September 30, the central bank and China Banking Regulatory Commission issued a notice on further improving housing finance services. For those who own a set of housing units and have settled the corresponding purchase loans, they apply for loans again to purchase general commercial housing to improve their living conditions. Banking and Finance Institutional implementation of the first suite loan policy. At the same time, banking sector financial institutions are encouraged to raise funds through various measures such as issuance of MBSs and special financial bonds with longer maturities, which are mainly used to increase the loan amount of the first self-owned and improved self-housing loans ; Expand market-oriented financing channels to support eligible real estate enterprises to issue debt financing instruments in the inter-bank bond market and actively and prudently carry out pilot projects of REITs.

CSRC: Provisions on the Administration of Asset Securitization Business of Securities Companies and Fund Management Subsidiaries

On September 26, the CSRC released the Regulation on Asset Securitization Business Management of Subsidiaries of Securities Companies and Fund Management Companies (revised version) at the routine ventilation meeting and solicited public comments on the upcoming new ABS business that is about to open its doors. In the new edition of "revised draft", the SPV which is required for the establishment of ABS business is renamed as "asset-backed special plan" and has a post-factum filing system. Fund subsidiaries can refer to these provisions to carry out business. At the same time, other companies under the supervision of futures companies, securities finance companies and China Securities Regulatory Commission, as well as commercial banks, insurance companies and trust companies, approved by the CSRC may conduct asset-backed securitization business with reference to the applicable provisions.

CIRC: Issuance of regulatory standards for solvency of collective funds trust schemes

Recently, the CIRC released the Rules for Compiling the Solvency Report of Insurance Companies - Q & A No.24: Trust Plan. The main contents include: First, the Trust Fund plans to adopt the "old and new" principle. The insurance company invests in the trust plan prior to the issuance of the "Questions and Answers No. 24" and implements the original relevant approval standards. The second is to adjust the fixed income category From the 95% level of AAA class to 90%, the aggregate funding trust scheme has been approved to be lowered from 90% to 85% for class AA (inclusive) to AAA class and 80% for Class A (inclusive) to AA class To 75%. Thirdly, the adjustment of the accreditation criteria for the equity fund trust plan of the Equity Interest Group was reduced from 80% to 75%.

SAFE: Inter-bank foreign exchange market participants intend to expand to non-bank institutions

By the end of September, the SAFE issued to the inter-bank participating agencies the Circular of the State Administration of Foreign Exchange on Adjusting the Relevant Management Policies for Financial Institutions to Enter the Inter-bank Foreign Exchange Market (Draft for Comment). The "Draft for Comment" shows that after the domestic financial institutions have obtained the approval of the State Administration of Foreign Exchange to qualify for the business of spot foreign exchange settlement and sale and the qualifications of the RMB denominated foreign exchange derivatives business, under the conditions of meeting the relevant technical specifications such as trading, liquidation and information, It can become a member of the inter-bank foreign exchange market to carry out RMB spot exchange and derivative product transactions, and clearly "does not implement pre-market qualification examination."

Bureau of Statistics: Official PMI for September was 51.1%

On October 1, the index of China's manufacturing purchasing managers released by the Census Service Research Center of the National Bureau of Statistics and China Federation of Logistics and Purchasing showed that in September 2014, China's manufacturing PMI was 51.1%, unchanged from the previous month, indicating that China's manufacturing Overall, the expansion trend still continues. From the sub-index, this month's production index, new orders index, new export orders index above the critical point. The index of production rose slightly to 53.6% this month after a brief drop last month, and the manufacturing industry continued its steady growth. A spokesman for the Bureau of Statistics said that from the recent trend of PMI and other major economic indicators, China's economic growth has entered a new normal and the small and micro enterprises in the manufacturing industry still face more difficulties. The next step is to step up implementation of the "directional" reform and adjustment measures that have been promulgated to support the development of the real economy and the development of small and micro enterprises, so as to promote the economy's stability and transformation and upgrading.

China Index Research Institute: The first nine months of land transfer fees decreased by 20%

October 9, China Index Research Institute released a report shows that from January to September, the 300 cities in the country a total of land transfer fees of 1.7109 trillion yuan, down 20%. Among them, the total amount of transfer fees for residential land (including residential land and comprehensive land with residential land) was 1,151.4 billion yuan, a decrease of 20% over the same period of last year. Beijing and Shanghai led the nation with 158.4 billion yuan and 103.4 billion yuan respectively, ranking Hangzhou third. Affected by the sluggish trading volume in the third quarter as a whole, only half of the cities in the list saw a year-on-year increase in transfer fees, with the highest increase in Fuzhou reaching 78%. Hangzhou and other 6 cities dropped over 30%.

Central Bank: Net investment of 16 billion yuan this week

On Thursday, the central bank opened a 14-day repurchase of 20 billion yuan. On the open market, there were 18 billion yuan 14-day repurchase on the open market and a net return of 2 billion yuan in the open market. Data show that the open market this week (October 4 - October 10) has 36 billion yuan repurchase is due, no central voting and reverse repurchase due. Based on this projection, the net investment of 16 billion this week.

Comments: Although the open market of the central bank last month, a net return of 56 billion, but the central bank put 500 billion SLF in a timely manner, combined with the bank's quarterly deposit deviation degree of harsh assessment, as well as the positive repurchase bidding interest rates lead to the end of quarter money market interest rates are not Lit down. The central bank to expand mortgage interest rates before the holiday minimum limit to help stabilize real estate sales and short-term economic expectations, the overall rate cut cycle has been opened in China, the future can be expected to further easing.

Industry News

Three quarterly trust products report: the first three quarters of the scale of 790 billion issuance

According to the statistics of Beneficial Trust, as of September 25, this year, 68 trust companies have issued 6,096 trust products in a scale of 790.035 billion yuan, exceeding the number of 5925 issued in 2013. A total of 1779 trust products were issued in the third quarter, reaching 223 billion yuan. Among them, there were 364 basic-industry trusts, 208 real-estate types, 212 industrial and commercial enterprises, 699 financial-related types and 296 other investment types, with sizes of 55.05 billion yuan, 46.720 billion yuan, 32.454 billion yuan, 41.150 billion yuan, 47.7 billion yuan. From the published expected earnings, real estate trusts are still in the average return of 9.63%, 9.49% of basic industries ranked second, financial and business classes were 8.70% and 8.53%, the income levels have declined .

Industrial Trust: Its Industrial Futures Co., Ltd. unveiled

Recently, Ningbo Cedar Futures Brokerage Co., Ltd. held its inaugural ceremony, officially changed its name to Industrial Futures Limited. Established in 1994, Sugimoto Futures Co., Ltd. has a registered capital of 100 million RMB. It is qualified for commodity futures brokerage, financial futures brokerage and futures investment consulting business. There are 7 branches in the country. In March this year, approved by the China Securities Regulatory Commission, Ningbo Regulatory Authority, Societe Generale Trust shares fir; July 28 approved by the State Administration for Industry and Commerce, changed its name to Societe Generale futures; September 16, China Securities Regulatory Commission issued to the Industrial Futures Approval After the renamed "operating futures business license."

National Trust: Publish a public trust to support Guizhou primary school

Recently, National Trust issued a public welfare trust program called "Love for a long time - Guizhou Qianxinan Zhenfeng IV in primary schools", which is also the first public trust project issued by the trust company. The public welfare trust 200,000 yuan can be set up to raise the maximum amount of not more than 2 million yuan, a trust fund will be donated to build a primary school Zhenfeng County, Guizhou Province, a school canteen to meet the school more than 600 students at noon at School meals, as well as more than 60 live-in students need three meals a day.

Ping An Trust: Invest 1.3 billion in Shanghai commercial property

Recently, Ping An Trust issued a trust plan to hold Shanghai commercial properties and set up no more than 5 SPV companies. All of them acquired 5 office buildings in the Southern District of Hongqiao Xiexin Center Project by way of assets transfer, raising no more than RMB1.439 billion. The Trust The period is 5 years. The original owner of the commercial property is HXH Holdings Group, founded in June 1994 and headquartered in Chongqing, is a large enterprise group that takes real estate development as the leading industry. This time the average price of the project for sale 28,000 yuan / square meters, far below the surrounding items in the sale of 30,000 to 40,000 yuan / square meter price.

CNAC Trust: Yunnan tin corrupt cases spread its trust products

Due to the corruption case of Lei Yi, the former Chairman of Yunnan Tin Industry, the risk exposure of a real estate loan trust project with a total amount of 800 million yuan by Air China Trust was exposed. "Air China Trust Apollo 340 Kunming Lixing Star City Trust Loan Scheme" was launched on February 6, 2013 with a total investment of 800 million yuan for the issuance of trust loans to Kunming Xishan Land Housing Development and Management (Group) Co., Ltd. , Investing in the construction of Phase II of Xingyang City, Kunming, the expected rate of return of 9% -9.5%, by means of credit for the project and construction in progress as collateral, while Yunnan Tin Group promised to transfer the principal and interest of this joint financing. At present, the project has been suspended for six months, and the sales center has announced it can not be delivered on schedule.

Present: Kunlun Trust Co., Ltd. shareholders, directors, supervisors and senior management

Distribution: CNPC Asset Management Co., Ltd., Kunlun Trust Co., Ltd. departments

Editor: And Jin to feed: Lin Yin proof: Lin Yin

Tel: 010-63597713 Post Code: 100033 Address: Beijing Financial Street, No. 1 Jinyaguang Building, Room 716, Block B

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