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April 16, 2012, 10:50 p.m. EDT

Missing businessman has 38 China banks on hook

Banks across China tied to Shide Group, whose chairman is missing

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By Wen Xiu and Yu Ning

BEIJING ( Caixin Online ) — At least 38 banks say they have lent money to Shide Group and firms linked to it, according to bankers in Dalian.

Xu Ming, the billionaire chairman of the conglomerate based in Dalian, in the northeastern province of Liaoning, has been missing since March 14. Following his disappearance, Caixin learned that banks had started reviewing loans made to Shide.

A source close in the capital previously said Xu was taken into custody by Beijing authorities for questioning on suspicion of financial crimes.

The 38 banks were located not only in Liaoning and neighboring provinces, but also in southern and southwestern provinces such as Guangdong and Sichuan.

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A bank executive in Dalian said he and his colleagues believed Shide Group and some of its subsidiaries borrowed more than 7 billion yuan ($1.11 billion) from banks. Another banker said the amount was at least 8 billion yuan. Read previous story on the missing billionaire businessman.

Bankruptcy fears

There is growing fear among local bankers that the corporation faces bankruptcy. “If various banks decide to call in loans to his businesses at the same time, the companies’ capital chains would readily fall apart,” one banker said.

A law firm has started preparatory work for a possible bankruptcy at the request of Shide, a source at the firm said. The person did not reveal details of the work or what assets may be involved.

This development unnerved many local bank executives, who said a more appropriate solution to the crisis would be for the government to act as an arbitrator and direct Shide Group to negotiate with banks about asset restructuring and debt repayment.

Four out of five major state-owned commercial banks have a stake in the corporation’s fate. Investigations by various banks of how much Shide Group and its subsidiary companies owe them are still underway because of the business group’s complex equity structure.

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Conservative estimates put the amount of loans outstanding that Shide companies have with the Agricultural Bank of China /zigman2/quotes/200705246/delayed HK:1288 -1.24% /zigman2/quotes/204629388/delayed CN:601288 -0.70%  at around 1 billion yuan.

China Construction Bank /zigman2/quotes/207732534/delayed CICHY -2.13%   /zigman2/quotes/208974133/delayed HK:939 -0.87% /zigman2/quotes/208058581/delayed CN:601939 -0.18%  also has about 1 billion yuan in loans with Shide companies. Sources close to the bank said CCB tightened credit to Shide businesses a few years ago because it found ambitious expansion plans problematic.

Bank of China /zigman2/quotes/201568493/delayed BACHY -1.74% /zigman2/quotes/209359942/delayed CN:601988 -0.33% /zigman2/quotes/204682472/delayed HK:3988 -1.13% said its Dalian branch had not made loans to Shide companies, but its branches in Jiangxi and Henan provinces lent the group between 300 million and 500 million yuan with relatively sound collateral.

Bank of Communications /zigman2/quotes/208048873/delayed BKFCF +2.25%   /zigman2/quotes/207155262/delayed CN:601328 -0.22% /zigman2/quotes/203442771/delayed HK:3328 0.00%  also lent money to Shide companies. It has recouped most of the loans but is not immune to the problem. In March, it classified as non-performing a loan worth nearly 200 million yuan to Shide companies, then removed the classification a few days later, a Dalian banker said.

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