Minsheng Investment Group (CMIG), China's largest Shanghai-based private investment bank, is to cut salary of top-level and middle-level executives for the purpose of restructure. The aim is to resolve its staggering debt problems, though it once aspired to be China's JP Morgan.
The latest plan comes a day after the company laid out plans for a repayment arrangement of its dollar bond, but the group did not specify the size of the cuts. According to the report of Shanghai Securities News, senior and mid-tier staff would have their salaries reduced by as much as 83 per cent. Salary cuts would average 53 per cent, while junior staff would not be affected.
CMIG's debt repayment difficulties became apparent earlier this year after it failed to make a payment on RMB3 billion (USD426 million) in Renminbi-denominated bonds. Since then it has managed to repay some of its local bonds with a delay. In July, it said that it won't be able to repay the USD500 million bond which was due the next month and that it was in discussions regarding possible disposals of certain offshore assets to improve the group's current liquidity situation.
It eventually made that payment, but the lack of state support for a large financial group, whose founder styled the group as a Chinese rendition of US investment bank JPMorgan.
CMIG rolled out a plan to sell off various assets in order to make other missed payments. It said in July that it would sell its 100% stake in a Tianjin-based unit to Wu Po Sum, chairman of Central China Real Estate for RMB1.65 billion yuan (USD 2.34 billion). In April, it triggered cross-defaults on $800m on which it had provided keepwell deeds.
Keepwell deeds were broken last year by defaults by CEFC and China Energy Reserve and Chemicals Group, causing new scepticism over its corporate strength.
While CMIG is private, its establishment was supported by top leaders and it was often described as the "brainchild" of Chinese premier Li Keqiang. said on the group's website that it had made a "bold decision to save itself through restructuring", which includes salary cuts.
