May is the Peak Month in 2014 for Maturing Real Estate Trusts with 20% Due

Mature trusts to test China

China's financial system is about to be tested with $US420 billion-worth of trust products coming due this year as worries grow that many debt-laden companies don't have the cash to pay back investors.

May is the start of a peak period for maturing trust products, which lend money from investors to areas like the property sector or industries shunned by banks, such as coal. These trusts have been a fast-growing source of credit in China. Nomura estimates that the crunch will come in third quarter through September, when one trillion yuan ($A172.5bn) of trust products are due, up from 694bn yuan in the first quarter.

There are ￥633.5 billion in maturing real estate trusts this year and more than ￥120 billion come due in May.

亿元房地产信托下月到期 为全年到期最高峰

trust statistics show that in 8547 a total of trust products expire, the total size of 1.273306 trillion yuan. Among them, the real estate investment trust focused on cashing peak in the second quarter.

According to Haitong Securities estimates, in 2014 the real estate trust maturity about 633.5 billion yuan, of which the value of the annual peak in May due, the amount due throughout the year accounted for about 20%. In other words, a rough estimate, the size of the real estate trust projects due in May or more than 120 billion yuan.

According to incomplete statistics Haitong Securities, from August 2012 to early this year, at least a total of 16 projects under pressure into the trust. Someone's private enterprises to small scale enterprises, the industry distribution, the real estate industry was the hardest hit, with 10 projects related to real estate.

Trust industry has pointed out that with the tightening of national regulatory policies, three, four-city housing supply pressure than a second-tier cities bigger, in addition, the main strength of the financing terms, in the case of capital chain tension, financing more difficult for small and medium developers, project its issue of trust or honor more prone to risk.

However, he believes that the current real estate investment trust in relation to other minerals, such as trusts are still relatively high-risk security. "Real estate projects generally have mortgaged land or buildings under normal circumstances, real estate mortgage rates are at about 30% to 40%, even if the substance of the financing counterparty defaults, trust companies to cover the principal and interest can be handled by collateral."

Investment remind preferred a second-tier cities well-qualified project

Guangzhou Man Investments executive director Liao Weihua pointed out, buy trust products, the first manager to pay attention to the strength and experience; followed depends on the strength and willingness to repay the financing side; Furthermore, what is the use of funds for project financing side repayment First, what is the second source.

Bohai Securities analyst Kang Kai is recommended that investors need to be cautious configure real estate trust products, the preferred second-tier cities in well-qualified real estate company development projects. Haitong Securities believes that with the release of the real estate needs of the industry slowdown, should be mainly invested enterprises.

Way out of trouble funding strand breaks? Information Management project or a broker disk access

On the one hand is a real estate investment trust expires huge scale, on the other hand is the size of the decline in trust financing, for some long-term projects, will result in funding strand breaks? In this regard, the industry pointed out that not all projects go through the real estate trust to borrow new-old "just needs to butt extremely individual items."

A large trust company pointed out that many of the "in" prefix Trust last year has been a lot of advance payment of real estate trust, both because of concerns about the risk, on the other hand it is this part of the project ahead of schedule to recover the funds, or find a new take over funds, these funds are part of taking over from the bank, the other part is from the Information Management projects.

"For example, some projects have been capped, or four cards are complete can begin selling properties, and this time the bank can intervene through mortgage loans to; Furthermore, there is no development loan facility for some banks, but also by way of resale to the loan. "he said.

According to reports, the business is a resale interbank business, the specific mode of operation are: Bank under resale agreement before buying financial assets expire at a fixed price and then sell back to another bank.

"Resale accomplished primarily through tripartite, for example, A bank wants to lend to its large customers, but due to the limited line of credit or other reasons, do not put out, this time to find A bank trust, set up a single trust lending to businesses. "who explained that these trust," that a single trustee who lend money to? A Bank B Bank to find, let B bought the trust. A to B to issue a "fallback Letter" premium to buy back the trust after the trust expires usufruct. "

Insiders pointed out that the essence of resale by the bank will be in the hands of the money market in the form of mortgage lending. Here, trust, brokerage, funds are acting as an "intermediary" role, a certain amount of access fees. According to incomplete statistics, the trust shall resale business accounted for half of the bank's balance sheet business.

Furthermore, the trust pointed out that although the decline in trust financing, but funds and brokerage of real estate projects this year, the "Sturm und Drang" momentum "if coupled with information management projects with a total financing of real estate projects will only increase not decrease . "he said.