January 19, 2018 / 9:54 AM / a month ago

Creditors send protest letter to China's Hebei province over unresolved debt crisis

BEIJING, Jan 19 (Reuters) - A group of creditors has sent a letter to China’s Hebei province that says the local government has failed to resolve a multi-billion dollar debt overhang that followed the collapse of the country’s second-biggest credit guarantor in 2015.

The letter, seen by Reuters and sent in December, accused local officials of being “inefficient and slow” in resolving the debt problem and trying to “avoid responsibility” for the failure of state-owned Hebei Financing Investment Guarantee Group, which had provided guarantees on loans to over 1,000 corporate borrowers in the province.

The Hebei government could not be immediately reached for comment.

The protest letter is the latest submission from the group of banks, trust firms, asset management firms and fund managers in one of China’s longest-running creditor disputes with a local government.

The plea also comes as pressure mounts on local governments to curb debts as Beijing’s crackdown on risky lending practices enters its third year. Local governments are increasingly being held to account for their debt woes, with Beijing saying it will offer no bailouts.

Hebei Financing was unable to help pay back at least 32 billion yuan ($4.8 billion) in loans to creditors when borrowers started to default amid a slowing economy in 2015.

Since Hebei Financing’s collapse, lenders have faced huge losses, and have repeatedly appealed to the provincial government to bail it out, sources involved in the situation told Reuters previously.

In their letter to Hebei’s provincial party secretary in December, trust companies said very little has changed since the debt crisis blew up three years ago.

The lenders said they have given the Hebei government “plenty of understanding, trust and tolerance”, but there has been no substantial progress in their 19 financing projects that ran into snags after Hebei Financing’s insolvency.

Financial institutions have been unable to use legal means to protect their rights as creditors, the letter stated.

The letter was also sent to the province’s National People’s Congress, high court, banking regulator, and other provincial government bodies, two sources with direct knowledge of the matter said. (Reporting By Shu Zhang and Ryan Woo; Editing by Sam Holmes)

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