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FINANCIAL SERVICES | Tony Chua, Hong Kong
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Credit China forms JV at a consideration of HK$198.9mn

The move to capitalise on demand for small loan services and expand market reach to Chongqing.

Credit China Holdings Limited (“Credit China”), one of the leading non-banking financing service providers in China, announced yesterday through its indirect wholly-owned subsidiary, c (“Jovial Lead”) to form a joint venture with Full Plus Group limited (“Full Plus”) and Profounders Project I Limited (“Profounders”). 

The joint venture, namely Chongqing Liangjing New Area Run Tong Small Loan Business Limited (”Run Tong”), is a PRC company principally engaged in small loan financing services. It is held as to 85% by Jovial Lead, 10% by Full Plus and 5% by Profounders. 

The Directors of the Company consider that entering into the Shareholders’ Agreement will enable the Group to exploit the relatively undeveloped small loan market in Chongqing, which has a relatively low micro loan to total loan ratio. Given the PRC government’s tightening of small loan financing license and the increase of the minimum registered capital requirement, the joint venture represents a valuable opportunity for the Company to tap into the fast growing small loan market of Chongqing. 

Mr Shi Zhijun, Chairman of Credit China said, “Leveraging the expertise and network of the joint venture parties, we are confident that Credit China will be able to expand our geographical reach from Shanghai to Chongqing as well as diversify our business portfolio by including provision of small loan services.“ 

Besides, Jovial Lead has entered into a Subscription Agreement with Gold Kingdom Holdings Limited (“Gold Kingdom”), regarding the issue of the Exchangeable Note. The net proceeds from the issuance, which is approximately US$7.45 million (equivalent to approximately HK$58.1 million), will in turn be used to pay up part of the registered capital of Run Tong. Under the Subscription Agreement, Gold Kingdom will subscribe for a principle amount of US$7.5 million (equivalent to approximately HK$58.5 million) of Exchangeable Note issued by Jovial Lead, which is due 2012. Upon the noteholder(s)’ exercise of the exchangeable rights attached to the Exchangeable Note, this represents 25% of the issued share capital of the joint venture to be injected in cash by way of shareholder’s loan.

Gold Kingdom is a wholly-owned subsidiary of China Fortune, a Hong Kong-listed company which is principally engaged in securities, futures and insurance brokerage and margin financing in Hong Kong, according to Credit China report.

Subsequent to the Subscription Agreement, a Shareholders’ Agreement is made between existing shareholders of the joint venture, pursuant to which Jovial Lead, Full Plus and Profounders will be required to contribute a total of US$30 million (equivalent to approximately HK$234 million) to finance the capital commitment of the joint venture. Among this, Jovial Lead will contribute US$25.5 million (equivalent to approximately HK$198.9 million).

Mr Shi Zhijun concluded, “We are witnessing a robust demand for short-term loan in the region, and Credit China will continue to capitalize on the booming demand to strengthen our leadership in short-term pawn loan provision, thereby maximising returns for our shareholders.”

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