Judger debt looms in Wenzhou

Judger Group, a top private garment maker and shipbuilder in Wenzhou, is struggling to repay debt and get bank loans as its predicament threatens to trigger a domino reaction of credit default in the entrepreneurship hub of Zhejiang Province.

"We have submitted a report to the Wenzhou government asking for help," a Judger Group staff member in charge of media communications, surnamed Yu, told the Global Times Wednesday.

The Wenzhou government will have a meeting on this issue Thursday, Yu said, but it remains unknown whether the Wenzhou government will extend a helping hand to Judger Group.

The Wenzhou government was not available for comment by press time Wednesday.

Yu dismissed a recent market rumor that Judger Group has filed for bankruptcy and is liquidating its assets to repay debts, but he acknowledged a crisis of cash flow.

He said that Judger hopes the government will coordinate with banks to support the group financially, since its fall might bring down other enterprises that have provided a guarantee service for the group's credit.

If Judger Group fails, its guarantors will have to repay Judger's debt, and this will lead these firms to go bankrupt as well in the weak economic environment, Yu said.

Judger Group is in a mutual guarantee agreement for over 30 billion yuan with six other companies which have as many as 90 subsidiaries altogether, so its bankruptcy could lead to a second wave of crisis among private enterprises in Wenzhou, the China Business News reported Wednesday citing unnamed sources.

"Judger Group is a flagship enterprise in the local garment manufacturing industry," Liu Aifen, deputy secretary-general of the Wenzhou Association of Enterprises, told the Global Times Wednesday.

Liu noted that the government should do something to help the enterprise before it dies, not after.

The garment maker expanded to shipbuilding in 2004 by investing 1.3 billion yuan in the industry, not anticipating the financial crisis that would come in 2008.

Shrinking trade under the sagging global economy has led to falling demand for new ships, and many shipbuilding businesses have suffered heavy losses since the financial crisis.

A Hong Kong customer defaulted in November on an order for two ships, preventing Judger from recouping the 500 to 600 million yuan it had invested in building the ships, and diminishing its cash flow, Yu said.

Judger Group was also blacklisted by China Construction Bank for an overdue 20 million yuan bank loan in October. The blacklisting prompted other banks to raise interest rates or reduce lending to the group, which made it more difficult to refinance and repay debts owed, Yu said.

So far, the group's debt is around 1.4 billion yuan, with depleting cash flow, he said.

In 2011, nearly a hundred business owners reportedly declared bankruptcy or fled the country, unable to repay huge debts after they turned to the high-interest underground lending market because they could not secure bank loans due to a tightening monetary policy, bad economic conditions and investment losses.