This financial support can be understood as two levels:
1. The enterprises and projects invested by this trust are projects supported by local financial support. For example, affordable housing, agriculture, and municipal administration. It only means that the industry or project invested in is valued by the local government.
2. The projects invested in this trust plan are directly included in the fiscal budget. The local government issues a financial commitment letter, and when there is a problem with the project, the local finance bureau will replenish the trust's principal and interest. Included in local government budgets.
So when choosing a trust project, you must read the contract carefully. Carefully analyze where your money is going. Are there any corresponding financial measures? Is it a real political trust project?
The following is an introduction to how to look at political trust trusts (which can also be regarded as popularizing knowledge)
First of all, the so-called political trust cooperation projects are where the government passes its subordinates A financing platform company raises funds from a trust company for a specific infrastructure construction project; usually, most of the operating income of local financing platforms comes directly or indirectly from government finance, including direct fiscal subsidies and market-oriented operations. Obtain financial funds as consideration, such as government repurchase payments for the construction of local infrastructure projects. Therefore, regardless of whether a local financing platform implements market-oriented operation or not, whether its operation is good or not, it is more or less inseparable from the resource endowment of the government. The speed of expansion is also largely determined by the government's policies. guide.
Specifically speaking to a single project, when analyzing whether a political and credit project is of high quality (here it refers to relatively high quality, friends who are superstitious about government credit can ignore me), I personally start from the following aspects. Below I It will list the key points that need to be paid attention to and how investors can use the limited information at hand to maximize the judgment of the pros and cons of the project.
1. Local financial situation
First of all, analyzing the local financial situation is the first step in risk assessment of local platform company financing projects. The characteristics of platform companies determine that their repayment ability depends largely on the fiscal revenue of local governments. Here, investors mainly search through relevant government websites and Baidu; for example, Baidu directly searches for "XX City's 2013 Public Accounting Fiscal Revenue"
Generally, you will find the fiscal revenue and expenditure of the previous year. If it is good, you will also find financial income and expenditures for more than three years. However, most of the data are rough and there is no detailed classification. The available data probably include general budget revenue, government fund revenue and extra-budgetary revenue. Among them, general budget revenue mainly comes from industrial and commercial taxes and other taxes. It is relatively stable and is also an important reflection of local financial strength. To go deeper, it is necessary to analyze whether the local industrial structure is single and whether tax revenue depends on some overcapacity (coal, steel ) or industries that are greatly affected by policies (real estate).
The income of government funds is mainly land transfer income. This part of the income is affected by the local land market and has poor stability. Fund income accounts for a high proportion of local fiscal revenue. In principle, when making risk judgments, it is necessary to consider local land reserves available for transfer, land supply and demand and other information during the project's existence (this is not suitable for investors to judge on their own, and can generally be ignored) ) Since land transfer income is greatly affected by macroeconomic policies, when judging local financial strength, trust companies usually mainly consider general budget income and set certain access thresholds based on this standard. For example, the access standard of Zhongrong Trust is Only areas with a general budget revenue of more than 3 billion at this level can be admitted, and for some trust companies, it is more than 4 billion.
After that, we need to analyze the local government expenditure and liabilities. The main ratios that need to be paid attention to are: debt ratio and liability ratio. These two data are generally difficult to obtain without due diligence reports. Here investors You can get a general understanding of local government debt through some auxiliary channels, such as statistics on the financing and bond issuance of major local platform companies through trusts. It would be better if it is an entity that has issued bonds recently. Search for the bond issuance instructions. , there will be a lot of information you want in it; then compare it with local fiscal revenue to roughly estimate the financial debt repayment pressure.
When local government debt data is opaque, trust companies tend to choose projects that are familiar with the region. If you have conducted business in a certain place and have a better understanding of the local situation, you will at least be able to obtain information more smoothly when judging risks. However, for areas involved for the first time, you will face more difficulties and your tendency to control risks may be greater. It will be strict. Under normal circumstances, the local finance bureau is required to stamp and confirm the debt balance assumed by the government. (Additional note: Zhongrong Trust’s standards for debt ratio and liability ratio are probably that the debt ratio does not exceed 100 and the liability ratio does not exceed 20; regarding the calculation method of these two ratios: debt ratio = government debt balance/local government comprehensive availability Financial strength; debt ratio = government debt balance/GDP. Furthermore, a high-quality local government should have a debt ratio of less than 70 and a debt ratio of less than 10. Some promotion materials often mislead investors, and only state finance in the promotion. Total revenue and GDP, and never mention general budget revenue, debt ratio and debt ratio. In fact, total fiscal revenue is usually full-scale fiscal revenue, part of which does not belong to local governments, that is, it looks good, but in fact it does not. )
2. The comprehensive strength of a platform company
The comprehensive strength of a platform company not only refers to its assets, but also includes the level, shareholders and responsible persons of the platform company. The ability of people to coordinate financial funds can be judged from various aspects such as shareholder structure, asset structure, main business, and financial institution liabilities.
(1) The shareholder structure of the platform company.
The shareholder structure of a platform company basically determines the level of the platform company, whether it is at the provincial level, provincial capital city level, prefecture level, district level or county level. The higher the level, the stronger the refinancing ability and the ability to coordinate the repayment of fiscal funds. Of course, generally at the provincial and provincial capital levels, trust financing (at least collective trusts) is rarely used, so the most common ones are among the top 100 counties ( (District) level local government
Usually platform companies where the government is directly an investor are important local platform companies with strong strength and relatively guaranteed repayment. Since the China Banking Regulatory Commission implemented a list-based management of local financing platforms in 2011, a considerable number of platform companies have been included in the "Full-Caliber Financing Statistical Table of Local Government Financing Platforms", requiring all banking financial institutions to fill in and update the reports every quarter. Regarding the act of issuing loans and providing financing to platform companies in the statistical table, the China Banking Regulatory Commission has set many compliance requirements, including cash flow, asset-liability ratio, loan investment direction, project capital, etc. In order to avoid supervision, some platform companies have established new subsidiaries and used backdoor financing. These companies are basically small platform companies, and most of their assets are patchwork. If they encounter problems, they are likely to be abandoned by the government because the opportunity cost is too low, you know.
(2) Asset structure of platform companies
Generally, the subjects that need to be paid attention to in the balance sheet are: monetary funds, inventories (land, development costs), intangible assets (land use) Rights sometimes hang here), accounts receivable (this is evidence to confirm the basic claims, that is, whether the government's debts really exist), short-term loans, long-term loans, etc.
Land assets are generally the main assets of platform companies. When analyzing land assets, special attention needs to be paid to how the platform company obtained the land, sold it or allocated it, and whether there are legal procedures. If it is a land transfer, whether it has been through bidding, auction and listing, whether the land transfer contract has been signed and the land transfer fee paid, and whether there are corresponding receipts, these are all things that trust project personnel should do during due diligence.
If it is allocated land, is there any approval document from the relevant government department? What is the designated use of the allocated land?
Document No. 463 of 2012 of the four ministries and commissions has clearly required local governments to inject land into financing platform companies through statutory transfer or allocation procedures, and explicitly prohibits local governments from injecting reserved land as assets into financing platform companies and authorizing Financing platform companies undertake land reserve functions and conduct land reserve financing. However, in practice, in order to reduce the asset-liability ratio of platform companies, there are still cases where local governments inject a considerable amount of reserve land and allocated land into platform companies without going through legal procedures (it even openly appears in some trust project risk control measures to reserve land). (Using land as mortgage), so I personally have always believed that as an investor, if you have no way to identify whether the land mortgage is legal and compliant, you should not blindly believe in the risk control effect of land mortgage, especially for some small trust companies. Political information project.
Even if the land is transferred, the platform company will negotiate with the government and apply for land use certificates without paying the land transfer fee. It is impossible for investors to screen, which requires Looking specifically at the due diligence capabilities of trust companies, some trust companies are obviously relatively rough. For example, the due diligence report of Zhongjiang International Trust's political trust project is generally only a few pages long. There is often no analysis of the collateral, and accounts receivable are used as the basic claims. There is no evidence of the authenticity of the project in the report, which makes people doubt the due diligence level of its project personnel. Strictly speaking, the land injected into the platform company without legal procedures cannot be regarded as the assets of the platform company, and the platform company does not have complete disposal rights over it. The government can take it back at any time on the grounds of procedural flaws.
Accounts receivable are also a relatively large part of the assets of platform companies. Platform companies generally undertake local infrastructure construction tasks and have a large amount of accounts receivable with the government. During due diligence, you need to pay attention to the reasons for the formation of accounts receivable, whether there are relevant agreements, government approval support, payment terms, as well as the payment amount and time points during the project duration, to determine whether this part of the assets is genuine and legal, and whether there are other flaws.
(3) The platform company’s liabilities and refinancing capabilities
Some more detailed promotion materials (such as CITIC Trust’s, the promotion is similar to due diligence), will disclose financing The liability structure and debt situation of the entity. Generally speaking, it is best if the liabilities are mainly medium and long-term (bond issuance, bank loans), which means that there is not much pressure to repay debt in the short term (within the trust period). This needs to be calculated by specific investors themselves. For example, you can search the establishment date and maturity date of trust financing through due diligence reports or online, and roughly estimate whether there is a lot of debt that needs to be repaid before the trust financing matures
If it has been issued Bonds are even better. First of all, the rating, bond issuance scale, and coupon rate can all explain many issues. Secondly, the bond issuance prospectus is a very detailed thing (enhanced version of the due diligence report), which includes the deadline of the financing entity. If you are patient, you can take a look at various data on the bond issuance date, including audited financial statements. I usually analyze projects, and if I have time, I will take a closer look at this section, especially the recent bond issuance instructions, which contain A lot of effective information can help us judge the basic situation of financing entities without a due diligence report
Refinancing ability is a double-edged sword. Some investors are frightened when they see too much financing. In fact, On the other hand, think about why so many trust companies, banks and other financial institutions are willing to provide financing to him, instead of looking for a local financing platform that no one cares about at first glance. Therefore, specific issues must be analyzed in detail; this is mainly in the cash flow statement. The cash inflow generated by financing activities is used to calculate the annual financing amount and financing capacity, and this is used as an assumption to infer the refinancing ability of the financier within the future trust period, plus whether the net cash inflow generated by its operating activities can cover the maturity. Debt and daily expenses; this is a technical job, as long as everyone knows how to read it. Generally, due diligence reports of large trust companies will have similar cash calculations, so don’t avoid them as soon as you see local governments with more financing. You still need to use data Come and talk.
3. Project transaction structure
As for the transaction structure that provides financing to platform companies, the simplest one is a loan, and it is also the least likely to cause problems. The legal relationship is simple, mortgage registration is smooth, and credit records are easy to check. It is simply the favorite of project personnel. However, there are also many compliance requirements for loans, such as asset-liability ratio, project capital, medium and long-term installment repayment, loan investment direction, quota calculation, etc.
Some platform companies that cannot meet loan compliance requirements can only obtain financing through other methods. The more common one is investment-attached repurchase. The targets are generally accounts receivable, equity and various income rights, etc. ( Zhongrong Trust likes to use a property rights trust model, where the client is the financier and the beneficiary is the investor). However, in actual operation, this type of transaction model usually faces the problem of being unable to handle mortgage and pledge registration. There is also a relatively big problem. In the process of looking for institutional investors, some institutions cannot accept this model of property rights, because institutions need to be both the trustor and the beneficiary to subscribe for this type of trust, and the entrustment of property rights trusts Human financier, I have encountered this in my actual operation, by the way.
In fact, the so-called innovative transaction structures are the product of avoiding current supervision. Some transaction structures also have certain legal risks in the name of innovation. For example, the right to earn income from investing in specific assets has been verified in the Anxin Kunshan Pure High School case. I have also provided it many times in my analysis posts. I hope that investors can avoid it if they see this type of transaction structure in government and trust projects.
4. Guarantee Measures
This is also the part that most investors are usually most concerned about. Guarantee measures for general government and trust projects generally include joint and several liability guarantees provided by bond issuers, physical mortgages and Pledge of accounts receivable, issuance of National People's Congress resolutions or special repayment arranged by the Finance Bureau, etc. So which of these risk control measures are relatively more effective and are more valued by trust companies in practical operations?
According to the requirements of Document No. 463, local governments are not allowed to provide any direct or indirect form of guarantee commitments. From a compliance level, local governments are excluded from acting as guarantors and issuing relevant guarantee commitments. Therefore, generally the government issues The relevant National People's Congress resolutions and financial documents only mean that the government is aware of and confirms the financing behavior. It does not mean that the government will actually include the repayment of trust principal and interest in the fiscal budget. There is no place to stand up for a lawsuit. Moreover, it can only be included in the fiscal budget in the current year. Isn’t it nonsense to include debts due in two or three years in the fiscal budget? Therefore, investors are reminded that it is wrong to be too superstitious about measures with implicit guarantees such as National People's Congress resolutions. The correct attitude should be that nothing is fine, and anything is better than nothing.
The physical asset mortgages that platform companies can provide are generally land and real estate. Land includes transfer land, allocated land and reserve land. The first prerequisite for using land as collateral is that the land was obtained by the platform company through legal procedures. If it is a land transfer, you need to pay attention to the land transfer contract, whether the land transfer fee is paid, and whether the land is idle. If the land is allocated, you need to pay attention to whether there are relevant allocation approval procedures, what is the purpose of the allocated land, and whether there is any unauthorized change of use. In practice, some platform companies negotiate with the government and directly apply for land use rights certificates without paying the land transfer fee. If this kind of land is used as collateral and the mortgaged land needs to be disposed of due to risks in the future, how to pay the land transfer fee back? , the amount needs to be coordinated with the platform company and the local government, and the worst case scenario is that the local government can revoke the mortgage right on the grounds that the land was transferred without legal procedures and there are major flaws in the mortgage registration process. Reserve land also faces the same situation. Although Document No. 463 clearly prohibits local governments from injecting reserved land as assets into financing platform companies and from authorizing financing platform companies to assume land reserve functions and conduct land reserve financing, in practice, some platform companies still have a large amount of reserve land under their names. and use it as collateral.
As a non-professional land bank institution, the platform company's act of the local government applying for a land bank certificate in its name violates the relevant regulations of the Ministry of Land and Resources. In addition, how to determine the value of the land bank and how to deal with risks if they occur in the future? ?
Here is a summary of my personal views on risk control measures. If we want to rank effective risk control measures, I think the first place is for high-rated bond issuers to provide joint liability guarantees. Why? ? Because bond issuers generally gather all the high-quality resources of local governments, because in the preparatory stage of bond issuance, in order to obtain higher ratings and lower financing costs, the government often injects land resources with excellent regional locations into platform companies to issue bonds. The entity's statements are also relatively transparent and reliable, with unqualified opinions issued by professional auditing institutions; to put it another way, if something goes wrong, it is much faster to seize and freeze the bank account of the guarantor through judicial procedures than to dispose of land assets. Much more; as for land, it takes a lot of energy to ensure the legality of the land and the accuracy of the assessed value. For ordinary investors, these are difficult to identify. Of course, if it is guaranteed by the bond issuer plus the transfer Natural land mortgage, that is of course better.
Let’s talk about whether trust companies are important when choosing political trust projects; political trust projects essentially rely mainly on government credit and are not fully market-oriented trust projects, so they do not have as much active management as real estate projects. The operating space and post-loan management are weaker than real estate trust projects
Some investors may think that screening projects is the first priority. In fact, I personally think trust companies are also very important. Listed below The following are trust companies that I think have certain advantages in political and trust projects:
1. Trust companies with securities firm-related backgrounds: CITIC, Minmetals, and Ping An;
This type of trust companies are Backed by securities companies, because in the process of issuing corporate bonds to local government platforms, securities companies have mastered a large amount of platform companies and local government platform information, the cycle is long, and the communication is sufficient, so they rely on platform resources to enjoy the most. Such trust companies It can have greater advantages than other trust companies in terms of local government's financial status, liabilities, inside information, etc.; CITIC Trust is a good example. Generally speaking, their government trust projects have certain merits, such as mine I have seen Danyang Municipal Trust, Shaanxi Fengxi, etc. In short, this type of trust company has more local government information because of its special resource endowment. In theory, the risks of the selected projects are also more controllable.
2. Banking and asset management departments: Huarong Trust, CITIC, CCB, etc.
The same applies to these trust companies, because they are similar to Huarong Management and various banks. Branches have relatively deep penetration in their respective local areas and have a clearer understanding of the actual situation of local governments. Generally, such trust companies can obtain more actual information about counterparties when developing business, and naturally have more control over projects. .
Recently, negative news about real estate has been constant, and there are many short-sellers in the property market, which has led to many customers turning to infrastructure construction projects. All in all, political and information projects are still a good choice. After all, they have strong government backing. However, local government fiscal revenue is closely related to land transfer. Once the real estate decline begins, without corresponding protection policies, local government debt crisis will follow. Come. Therefore, it is better to study the government trust trust carefully, which is responsible for yourself and your customers.