A reader asked me to elaborate about YZJ HTM. I am quite sure Ren every HTM is different, but maybe I can shed some light on this Tianjin GuoHeng event.
Tianjin GuoHeng ex-controlling shareholder, lets call it A. Owned B money, and pledge its shares to B. A is supposed to transfer the shares to B, or any company B appoint. B appoint YZJ to take over the shares. The shares are like collateral for a loan. A is supposed to pay YZJ interest and will redeem the shares in 1 year, failing which, the shares will belong to YZJ. Since A pledge to buy back the shares in a year time, YZJ promised to, in the meantime, pass an attorney of management rights to A, subject to various terms and conditions so that the shares remain of value.
Once this agreement is in forced, and shares are transferred, B is out of the picture. Ren then add another layer to this agreement, the shares is bought over from B using Ren investment co, C. YZJ then provide the HTM service to C, in the form of loans with interest for C to buy the shares.
Why bother to add that additional level? I speculate, after chatting with city farmer from valuebuddies, (my own understanding, might not be what he thinks ) is YZJ is still Ren biggest baby, with the shipbuilding business being its lifeline of cash generation. So it is highly unlikely that C, which is also under Ren to default. If C did not receive interest from A, it will then proceed to recover its collaterals and in the meantime, the YZJ HtM can roll over it, without declaring a default. Also, given now that A has sue Ren, the buck can stop at Ren and C, without affecting the shipbuilding business.
I wonder if all these make sense. If there are readers who are able to point out mistakes or misconception, please do so, and share your knowledge so that everyone learn.