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China Trust Investors Demand Funds From ICBC After Bailout

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Feb. 18 (Bloomberg) -- Chinese investors in a troubled high-yield trust product who were bailed out last month gathered at Industrial & Commercial Bank of China Ltd.’s Shanghai branch to demand more interest payments.

About 20 investors from Shanghai, Zhejiang, Beijing and Guangdong plan to ask ICBC for at least 256,600 yuan ($42,300) in interest owed to each of them, according to a statement from Chang Feng, a spokesman for the group. China’s largest bank, which distributed the $495 million product to its wealthy clients, and the trust company that issued it, are responsible for the payments, Chang said.

The discontent with the bailout -- which averted what would have been the biggest default in a decade in China’s $1.8 trillion market for trust products -- underscores the risks associated with their implicit guarantees and the government’s backing of such investments. An unidentified person or group offered to buy rights in Credit Equals Gold No. 1 last month to ensure that investors recouped their principal.

“The regulators are faced with a very difficult and challenging situation because the final solution will set a precedent for future cases,” Chen Xingyu, a Shanghai-based analyst at Phillip Securities Group, said by telephone today. “Allowing the issue to drag on indefinitely is probably not an option as the case is having a huge impact.”

Disgruntled Investors

The disgruntled investors, who had each put in a minimum of 3 million yuan and received three interest payments since 2011, have said the December installment didn’t match the promised rate of return. The Credit Equals Gold high-yield product, issued by China Credit Trust Co. and sold to more than 700 ICBC clients, was structured to raise funds for Shanxi Zhenfu Energy Group. The coal miner collapsed in 2012 after its owner Wang Pingyan was arrested for illegally collecting deposits.

The investors in Credit Equals Gold plan to send the statement with their demands to ICBC, China Credit Trust, the China Banking Regulatory Commission and the China Trustee Association, Chang and another spokesman who would only give one name, Chen, told reporters today. The group is also demanding compensation for costs associated with hotel accommodation and transportation, as well as penalties for the delayed interest payment.

ICBC’s marketing of Credit Equals Gold was fraudulent and the funds were mismanaged by China Credit Trust, the investors, who were gathered at ICBC’s private-banking branch near the city’s historic Bund waterfront area, said today.

To contact Bloomberg News staff for this story: Jun Luo in Shanghai at jluo6@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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