Hanergy Group allegedly had secured an 8-billion yuan credit line from Bank of Jinzhou, a Liaoning-based city commercial bank which applied for a stock listing in Hong Kong last year. Photo / IC

Liaoning-based Bank of Jinzhou has been forced to delay its $600-million initial public offering (IPO) in Hong Kong after the city's stock exchange raised questions over its exposure to the parent of Hanergy Thin Film Power Group Ltd.

Hong Kong's Securities and Futures Commission (SFC) is investigating Hanergy Thin Film Power, a mainland solar energy firm whose shares crashed last month.

Bank of Jinzhou, a city commercial bank in Liaoning province, had intended to conduct the IPO this month. However, people close to the plan say that timeline is now unworkable after the Hong Kong Stock Exchange asked for more information about an 8 billion yuan ($1.29 billion) credit line that Bank of Jinzhou granted to Hanergy Group, the parent of Hanergy Thin Film Power.

The documentation for the IPO is based on the bank's financial results from the end of December. Past June, those results would no longer meet Hong Kong's listing requirements.

"Hanergy is currently facing a probe by the SFC and it's not difficult to imagine how careful the stock exchange is in handling the lender's listing application. They are asking the lender to provide every single detail of the credit line and whether it has provided other loans to Hanergy," said one of the sources.

"We expect the stock exchange will only schedule a listing hearing for Bank of Jinzhou when there is more clarity on the Hanergy situation. The regulator definitely doesn't want to take the blame of letting the lender go public, if Hanergy fails to repay the loan and hurts the lender's profit," said another source.

Hanergy Thin Film Power's Hong Kong stock has been suspended since it plummeted nearly 47 percent in less than an hour of trading on May 20, ending a run that had seen the company's market capitalization more than treble since November.

Mainland business magazine Caixin reported the following day that Hanergy had secured an 8-billion credit line from Bank of Jinzhou in the second half of last year. The report did not say if Hanergy had drawn any of that facility.

A credit line of this size would represent close to 10 percent of Bank of Jinzhou's total loan book. According to an application proof published on the Hong Kong Stock Exchange website, as of Dec 31, 2014, the lender had total loans and advances of 88.8 billion yuan, total assets of 250.7 billion yuan and total deposits of 119.4 billion yuan.

Eight days after trading of Hanergy Thin Film Power was halted, the SFC said on May 28 that it had launched a formal investigation in the company and the investigation was still ongoing.

The loan is not the only connection. Bank of Jinzhou and Hanergy Thin Film Power also have a common shareholder. According to the application proof, Yinchuan Baota Refined Chemical Industry Co Ltd is the largest single shareholder in Bank of Jinzhou with a 5.68 percent stake, having first bought a 4.54 percent interest for 700 million yuan in November 2014.

Yinchuan Baota is mainly engaged in the production and sale of crude oil, heavy oil and solvent oil and is a wholly owned entity of Ningxia Baota Energy Chemical Corp, according to the proof.

Ningxia Baota Energy Chemical is, in turn, a wholly owned subsidiary of Ningxia Baota Petrochemical Group, according to the website of Baota Petrochemical.

Baota Petrochemical has participated in two share placements of Hanergy Thin Film Power since 2014.

In January 2014, Hanergy Thin Film Power sold 500 million shares at HK$0.82 each to Guangdong Southern Baota Investment Holding Ltd, which is 75 percent under the control of Baota Petrochemical.

In March this year, Hanergy Thin Film Power announced that it planned to issue 300 million to 3 billion shares at HK$5.38 each to Baota Petrochemical to establish a long-term relationship after the latter's subsidiary agreed to purchase equipment and services from the company worth a combined $1.32 billion.

Bank of Jinzhou posted a 2014 net profit of 2.1 billion yuan, up 57 percent year on year. As at the end of 2014, the lender's core Tier 1 capital adequacy ratio stood at 8.64 percent, while its non-performing loan ratio was at 0.99 percent.

CCB International (Holdings) Ltd (CCBI) is the sole sponsor of the lender's IPO. A spokesman of Bank of Jinzhou could not be reached for comment. CCBI declined to comment.

(HK Edition 06/20/2015 page7)