Busted company’s boss in Wenzhou arrested, billions in debt7 February, 2012, 14:29. Posted by Zarathustra
Tags: Economy, Wenzhou
Remember our occasional coverage on the underground lending/ shadow banking/ bosses disappearing saga in parts of China (more often in Wenzhou)? 90% of families in Wenzhou were involved, and bosses are disappearingeverywhere, while those not yet disappeared were selling properties.
China wanted to rescue all these Wenzhou mess, but whether this is helpful will be a completely different matter (and we probably won’t know until…). A few days ago, a boss is being arrested in Wenzhou. The company in question is Liren Education Group (via Sina), a company which apparently runs school. But besides schools, they are running some irrelevant businesses (just as you would expect for a Wenzhou company that went bust), like real estate (predictably), mining, etc.
Over the years, the company has obtained financing from these underground lending in a really large scale. While one of the company’s directors said the company has CNY 2.2billion outstanding, not all are convinced by this number, and one lawyer estimated that the total debt raised from these non-bank sources amounted to CNY7-8 billion over the years. As the Wenzhou mess hit hard last year, the company went bust, and since November last year, the company has stopped paying down debts and interests. While the company is being restructured, not all creditors are happy. At the end, the chairman of the company and 6 other directors arrested.