"China Trust Defaults Seen as Coal Maturities Quadruple"
I found this article very interesting and I am trying to understand exactly where LLEN sits in all this. I do recall however that closing a deal on a large NE mine, management has said they have secured the finances and are ready once the right opportunity presents itself. I pasted parts of this column and find it interesting that the bigger the coal companies in China are, as the economy slows, the more pressure builds and along with that more defaults on debt will arise. LLEN just might be in the right position to grow while others are dissected or default. Read.
"That’s adding to concerns as trusts face mounting redemptions. About 907 billion yuan of so-called collective trusts will come due this year, including 15 billion yuan tied to mines, Citic Securities Co., the nation’s biggest brokerage, estimated last month. Collective trusts differ from other trusts that cater to single buyers such as institutional investors. "
“Trust products tied to companies in overcapacity industries, such as coal, steel and nonferrous metals, have the highest probabilities of default,” Li said. “With the economy expanding at a slower rate, companies that expanded too quickly are doomed to suffer"
“There are different opinions on whether the government should allow defaults,” said Li Ning, a bond analyst at Haitong Securities. “Regulators, such as the central bank, hope to build a sound system of sharing risks, while local governments and financial institutions still have low tolerance for defaults as they want to protect their own reputations.”
So the questions might be, are they TOO BIG to FAIL? And can a small investor like LLEN take advantage of this environment and come out on or near to the top? I am looking forward to the upcoming ER for clues to the answers, as in my mind I am optimistic in the fact that LLEN showed exceptional results last QTR, boasting a 40% GP on a 70% increase in mining!