21st Century: Why did Credit & Rich choose to introduce OET (Hongkong Outjoy Educational Technology Co., Ltd.)? Is there any consideration to keep the stock price from delisting?
21st Century: Is Credit & Fortune confident in cooperating with OET lending institutions to ensure that the company does not delist?
Wang Zhengyu: At present, we will cooperate with OET mainly in the following aspects: first, they invest in stocks; second, we cooperate to set up a project company to carry out the loan business; third, we have reached a consensus to provide a relatively stable fund payment scheme for credit and wealth platform stock lenders, that is, to put forward the companys future development institute. Part of the value generated is given to the lender.
It should be said that the capital market is cautiously optimistic about this, which can also be seen from the stock price performance. After the announcement of the cooperation agreement, the stock price almost recovered from the lowest of $0.22 to around $0.5. Of course, to really get rid of the delisting risk, we need to land a new loan project company as soon as possible to enable it to produce. Produce expected performance, thus driving stock prices back to the safety line above.
21st Century: Can we understand that the performance of new project lending institutions in the future will determine whether the future stock price and delisting risk of Credit and Fortune can be calmed?
Wang Zhengyu: We hope that this new project company will produce good performance. But in the practical operation, the first thing we need to do is to speed up its landing, because this loan institution carries out business on the basis of the Internet, needs to obtain ICP (Internet Business License) qualification, go through the process of registered capital in place, and manage it. I personally estimate that it will take 1-2 months to arrange the companys operating charter and management structure.
Encounter the predicament of collecting money
21st Century: Today, the market is very concerned about how Credit and Fortunes P2P business recovers. Since mid-April, many investors have experienced overdue payment and late collection. How does Credit & Fortune intend to solve this problem?
So we are speeding up the collection of borrowers. Since mid-April, we have also taken a measure, that is, the funds recovered from the P2P business will not be lent any more, and all of them will be returned to the investors, so as to shorten the time for the lenders to recover the principal and interest as much as possible.
21st Century: Does this effectively improve the rhythm of the lenders return of principal? Can you disclose the approximate proportion of principal returned to the lender at present?
Wang Zhengyu: Since mid-April, we have implemented three monthly repayments, and the proportion of monthly repayments is relatively stable. Our strategy is to start with capital and interest, and different lenders have different investment and lending amounts and matching borrowing targets, so the actual amount of repayment they receive may be different.
At present, we will not publish the overall return ratio, because we do not want you to calculate the monthly return ratio and time, which may cause misunderstanding in the market. Because the current collection environment is not very optimistic.
21st Century: The collection environment is not optimistic enough. What are the main manifestations?
Wang Zhengyu: It is mainly manifested in two aspects. First, with the fluctuation of the industry, many borrowers on the Internet are now circulating various claims that they can not pay back money. Many borrowers want to see the situation of the P2P platform, so they can not pay back money. This is also the problem of debt evasion that we often mention now. Frankly speaking, the industry now evades money. The debt situation is much worse than before. Second, the relevant departments take some measures to make the collection face greater legal pressure, some phone calls or door-to-door collection, will be overdue borrowers complain, resulting in a great pressure on collection.
Wang Zhengyu: We think that the hen laying eggs, we can not cut it to everyone, but should let it continue to lay eggs. One hundred million yuan is a hen used to lay eggs. It will produce higher value. It is a pity to divide it up.
In fact, even if the money is divided up, it will be a drop in the bucket, and it will not solve the problem of repayment of all the principal of the lender. But if it produces value, it can generate multiple returns. Therefore, the money will be used to develop the loan business and promote the operation of the new project company.
21st Century: Credit & Wealth recently launched a win-win plan, which can really help lenders get back all the principal?
Wang Zhengyu: On this win-win plan, we have in-depth communication with our partners, shareholders and the board of directors, and formed this plan. Specifically, we are willing to lend 1/3 of the companys shares to lenders, 1/3 to partners and 1/3 to existing shareholders. Through such a mechanism, we hope that lenders, partners and shareholders can benefit from the transformation and development of the companys business. For lenders, we can also speed up the return of their funds - in addition to Borrowers can also get dividends from their future development.
As for whether the win-win plan can cover all principal repayments of lenders, I can only provide an estimate here. Ideally, in the next three years, the loan volume of Credit & Fortune loan business will reach about 20 billion yuan, resulting in 60-80 billion credit transactions annually. Based on 2-3% business income, it may create annualization for the company. Business income is about 2 billion yuan. Based on the 7-fold P/E ratio, the companys market value will rise to 14 billion yuan (or about $2 billion), so that the lender should be able to get more than 4 billion yuan (or more than $600 million) of market value, which theoretically covers most of the principal repayment of the lender, because the figure is close to our current lenders. Total outstanding balance.
21st Century: Is the forecast of 20 billion yuan loan funds in the next three years too optimistic?
Of course, this is not a promising business planning target, we will do our best to achieve it.
21st Century: How has the lender responded to this?
Some lenders are still worried about the complexity of the transaction structure and whether it will help them achieve the accelerated return of principal due to the overdue payment problems they encountered in the past. Therefore, our next priority is to clarify the trading structure and strive for their understanding.
In fact, this is the lender does not know much about this transaction structure. In the trading structure of win-win plan, the concept of warrant is introduced instead of bringing one third of the companys shares into SPVs holding right now. That is, when the development of the companys loan business satisfies certain conditions, the warrant can be implemented. The company will issue the corresponding shares to SPV company, and then the SPV company will buy and sell stocks to invest. Gold is returned to the limited partnership and eventually entered into the lending pocket.
Regulators are carefully assessing the operability of the win-win plan
21st Century: It is said that there are still many legal obstacles to the real landing of the win-win plan. Especially, China has not allowed lenders to directly hold shares of Listed Companies in the United States. The Securities Regulatory Commission of the United States will also ask whether the win-win plan meets the relevant regulations. How to solve these problems?
At present, we have formally reported this transaction structure to the Securities Regulatory Commission of the United States.
Reflections on P2P Industry
21st Century: As you mentioned earlier, Credit Rich is a long-term business. It provides users with stickiness through continuous service, and encourages them to recycle loans. The ultimate revenue can cover the cost of customers and create profits. Today, Credit & Fortune reports show that losses continue year by year. Is that the business model you set up at that time wrong? Or is the change in the external environment leading to the unacceptability of this business model in China?
Wang Zhengyu: Actually, there are many successful cases in the United States to be a long-term business model. At first, we imagined that it also has huge market opportunities in China - low-rate, low-quota, low-cost loans, of course, can not cover all costs at one time, but if the borrower can reuse, help customers continue to accumulate credit, can do long-term business, and then recover costs and create considerable profits.
So we call it a business model with low start and steady growth. But now it seems that this business model needs two major prerequisites, and we are underestimating the changes encountered by these two prerequisites.
Second, the business model itself can not be constrained, it should allow customers to reuse, let customers constantly improve the loan quota, business development scale continues to expand. But at present, Chinas P2P industry encounters a special situation, which is three declines - requiring the scale of the platform, the number of borrowers, and the number of lenders to decline.
As a result, Credit and Wealth, a high-flying, large-scale customer-seeking, low-rate operation and large-scale expansion of the organization, will face great difficulties at this time. This is reflected in the continued loss of our business. I can give you an account. The overdue level of our platform (mainly a months loan) is about 4.7% - 4.8%, which is equal to the risk rate of our platforms loan, which is 5%. According to the state regulations, the interest rate of the loan should not exceed 36% annually (the monthly rate does not exceed 3%). So we will lose 2% when we lend a loan. The more we owe, the more we lose. Thats one of the reasons why we keep losing money.
21st Century: Combined with a series of business twists and turns of Credit & Fortune and the situation of lendersoverdue repayments, what problems do you think need to be solved urgently in the current development of P2P industry? What are your reflections on Credit and Richness?
Wang Zhengyu: There are still several problems unsolved in the development of domestic P2P industry.
I must admit that Credit and Fortune underestimated the above problems in the industry. The underestimation of risk characteristics, capital cost, credit environment and operation characteristics in the market makes us make a lot of mistakes in the process of operation expansion.
Wang Zhengyu: The so-called overhead was because the company wanted to take the road of professional manager management, especially when the company was in trouble, shareholders and the board of directors wanted to continue to seek new business directions and find new, more active and more suitable management companies. I also supported it. From this point of view, I think there is no overhead problem.
Wang Zhengyu: In mid-April, we found that the companys operating capital was under great pressure, and there were problems in the payment of lenders. For example, it is impossible for a lender to cash in and withdraw in a rigid way.
At that time, many employees felt that the sky is falling down, and they did not know what would happen to this matter. So in this case, a considerable number of management members are leaving, and everyone is worried about not knowing what the future will be like. I think as the founder of the company, at this time, no matter what the position is, we must stand up to solve these problems. To this day, we are still facing these business problems.
Wang Zhengyu: If we resume the offer, I personally feel that in the six months before mid-April, the measures that should be taken in time have not been implemented.
Secondly, we should strictly strengthen the risk control mechanism. However, we have not taken decisive measures. Since 2018, borrowerswillingness to repay has deteriorated and the level of risk has been rising. We should take positive and decisive measures to curb the rising level of business risk. Although our companys internal financial data are fairly good compared with industry data, the rising trend of risk level is obvious, but we have not taken decisive measures to curb this trend.
Source: Responsible Editor of Economic Reporting in the 21st Century: Wang Xiaowu_NF