(Source: 21st Century Economic Report 2024-01-06)
Recently, Zhongyuan Trust Co., Ltd. (hereinafter referred to as "Zhongyuan Trust") won the second instance of its 1.65 billion yuan claim.
In the second-instance judgment, the Henan Higher People's Court basically upheld the content of the first-instance judgment and ordered the borrower Shenzhen w88 mobile Venture Capital Co., Ltd. (hereinafter referred to as "w88 mobile") to repay the principal of 1.097 billion yuan, interest of 180 million yuan, and penalty interest, compound interest, and liquidated damages of approximately 370 million yuan to Centaline Trust, for a total amount of 1.65 billion yuan.
However, the realization of the creditor's rights may still have to cover a considerable distance.
The reason is that Tian Fujin’s bankruptcy application has been accepted by the court during the second instance. After learning of the judgment, w88 mobile has filed an application with the bankruptcy administrator, requesting that the confirmation of Zhongyuan Trust's claims be suspended. The bankruptcy administrator will file a retrial with the Supreme People's Court on behalf of w88 mobile in accordance with the law to safeguard the legitimate rights and interests of w88 mobile and other general creditors.
Lou Qiuran, Assistant Dean and Associate Professor of the Law w88 casino of the w88 casino, told the 21st Century Business Herald reporter that because Tianfujin Company applied for retrial to the Supreme People’s Court, the judgment has not yet finally taken effect.
The borrower has been filed for bankruptcy
This financial loan dispute dates back to 4 years ago.
Public information shows that w88 mobile is a venture capital company engaged in direct investment in high-tech industries and other technological innovation industries, investment consulting business, direct investment or participation in the construction of business incubators.
In December 2018, w88 mobile and Zhongyuan Trust signed a "Trust Loan Contract", stipulating that Zhongyuan Trust would issue a working capital loan of 1.1 billion yuan to w88 mobile for w88 mobile to repay the liabilities of financial institutions and purchase goods. The total term of the loan is 36 months, and the annual interest rate of the loan is 9%. The actual investor of the trust loan funds is Luoyang Branch of Zhongyuan Bank.
In order to guarantee this loan contract, w88 mobile’s actual controller Huang provided a joint guarantee for the loan, and w88 mobile provided pledge guarantee to Centaline Trust with its approximately 100 million shares of Tianyin Communications Holdings Co., Ltd. (hereinafter referred to as “Tianyin Holdings”) and the derived income from the stock. After the loan contract expired, w88 mobile and the guarantor failed to repay the loan as promised. Therefore, in May 2023, Zhongyuan Trust filed a lawsuit with the Intermediate People's Court of Zhengzhou City, Henan Province, and added the Luoyang Branch of Zhongyuan Bank, the actual investor of the trust loan funds, to participate in the lawsuit as a third party.
The court of first instance quickly issued a judgment, ruling that w88 mobile should repay Zhongyuan Trust’s loan principal of 1.097 billion yuan, interest of 180 million yuan, and penalty interest, compound interest, and liquidated damages of approximately 370 million yuan, totaling 1.65 billion yuan. The guarantor shall bear joint and several liability for this. After the first-instance verdict, the defendant appealed to the Henan Provincial Higher People's Court, and the second-instance court basically upheld the content of the first-instance ruling.
During the second instance, the borrower Tian Fujin’s bankruptcy application has been accepted by the court. In August 2024, the Shenzhen Intermediate People's Court of Guangdong Province accepted the creditor's bankruptcy application against w88 mobile and designated Shenzhen Jindaan Liquidation Services Co., Ltd. as the administrator of Shenzhen w88 mobile Venture Capital Co., Ltd.
In this regard, after learning the results of the second-instance judgment, w88 mobile stated that it had filed an application with the bankruptcy administrator, requesting to suspend the confirmation of Zhongyuan Trust’s claims. The bankruptcy administrator would file a retrial with the Supreme People’s Court on behalf of w88 mobile in accordance with the law to safeguard the legitimate rights and interests of w88 mobile and other general creditors.
Pledged equity worth over 1 billion yuan has become the focus of debt realization
Lou Qiuran said that Tian Fujin applied for retrial to the Supreme Court to protect the rights and interests of general creditors.
"From a practical point of view, after the company initiates bankruptcy proceedings, it is a common situation for the bankruptcy administrator to apply for a suspension of confirmation of claims, because the pledged claims have priority and will be paid prior to general creditors. This is an act to protect the legitimate rights and interests of other general creditors. If the Supreme People's Court's retrial changes its judgment on issues including the amount of claims, etc., the necessity of such suspension of confirmation will be highlighted." Lou Qiuran further explained.
Dr. Yang Xiang, chief architect of Zhonglun Borong’s strategic philanthropy and wealth inheritance team, told the 21st Century Business Herald reporter that in financial loan litigation, the focus of litigation often focuses on interest, liquidated damages, etc. w88 mobile filed a retrial with the Supreme People's Court, with the purpose of seeking to reduce the burden of debt interest, especially the huge liquidated damages and penalty interest of up to 400 million yuan.
Yang Xiang told reporters that as a company that has been accepted for bankruptcy, its ability to repay debts is worrying. Whether the 100 million shares of equity as pledge can be realized will be the key to creditors realizing their claims.
The important collateral for this financial loan contract is the 100,473,933 shares of Tianyin Holdings held by w88 mobile, accounting for 10% of the total share capital of Tianyin Holdings. 9.80%. According to the Enterprise Alert Channel, the top three shareholders of Tianyin Holdings are: Shenzhen State-owned Assets Supervision and Administration Commission (19.03% shareholding), Shenzhen Investment Holding Co., Ltd. (19.03% shareholding), Tianfutong (9.8% shareholding), and the company's controlling shareholder and actual controller Shenzhen Investment Holding Co., Ltd. and Tianfutong are persons acting in concert.
Judging from the market value of the shares, the overall market value has tended to be stable, with a slight increase. As of press time, the share price of Tianyin Holdings was 10.91 yuan per share, which means the current market value of the shares is approximately 1.091 billion yuan. In fact, Centaline Trust has applied for judicial freezing of the shares on July 14, 2023. Our reporter has observed the stock price trend since the application for judicial freezing. The overall stock price has not been greatly affected, and the trend has shown a fluctuating rise: the stock price on July 14, 2023 was 9.11 yuan/share, and today, it has achieved an increase of about 20% compared to that day. The judgment of the second-instance court also mentioned that Centaline Trust will receive priority compensation from the auction and sale of approximately 100 million shares of the company held by w88 mobile and the proceeds derived from the shares.
Judging from the risks to Tianyin Holdings from the auction and sale of the shares, Tianyin Holdings pointed out that if the above-mentioned shares are subsequently transferred through judicial auctions or other forced transfers, there is a risk that the proportion of voting rights of Tianyin Controlling shareholders to the company will change. When asked whether Tianyin Holdings could take measures such as protective repurchases to maintain the stability of the company's control, Lou Qiuran told a reporter from the 21st Century Business Herald that repurchases simply to ensure that the company's control rights remain unchanged are not expressly stipulated in the share repurchase rules of listed companies.
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