In the news: Johnson & Johnson gets fined, CBRC prepares P2P laws, Volkswagen issues ABS and Chinese companies buy Brookstone

J&J and Bausch & Lomb fined for price fixing

Johnson & Johnson, the world's biggest healthcare products maker, along with Bausch & Lomb, Essilor and Nikon were fined a combined Rmb19.6 million (US$3 million) by the NDRC for price fixing in the country's contact lens and glasses market. Some of the fined companies had asked suppliers to sign a contract strictly adhering to the manufacturer's suggested retail prices. Hoya and Shanghai Weicon Optics were also investigated but were not punished as they had voluntarily reported anticompetitive practices and rectified the issue, the NDRC said.

Source:
Bloomberg

Regulators have intensely scrutinised multinational and domestic companies over pricing in the past year – six baby formula companies including Mead Johnson Nutrition and Danone were collectively fined Rmb669 million for violating anti-monopoly laws in August. The three anti-monopoly regulators – the NDRC, MOFCOM and the SAIC – are cracking down on violators. While it seems clear that they want to show that they will not tolerate such behaviour, this combined fine of Rmb19.6 million among five or more multinational firms feels more like a slap on the wrist.

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CBRC ready to roll out P2P laws

The CBRC is working on the country's first regulations for the peer-to-peer loan industry by treating it as a type of private lending. P2P lending sites will therefore not be regulated as financial institutions, and the website operators will not be required to get financial licences, though the range of their operations will be limited. The new rules are expected to be introduced by the end of the year. The market is hoping that these rules will clarify some of the legal ambiguity surrounding the operations of these P2P lending sites, including the danger that their executives are accused of illegal fundraising – a crime punishable by death in China.

Source:
Caixin

The CBRC held two meetings in May with scholars, lawyers and industry experts to hear their opinions on how P2P lending should be regulated. Guo Yuhang, CEO of P2P website Dianrong.com was present and said speakers were focused on creating ample space for P2P lending services to work without conflicting with existing laws. Wang Xinrui of Anli Partners has said as long as P2P lending sites stick to being only an information intermediary, they will not need to get a licence from the regulator, though if they start providing loan guarantees, pooling funds and taking in deposits from the public, they will be treated as running a financial business and must be regulated more strictly. The regulators have yet to reach consensus on the issue of capital pools; the riskier and more specialised areas may remain vulnerable to loopholes.

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Volkswagen plans Rmb800 million securities issuance

Volkswagen will follow Ford and Toyota in issuing about Rmb800 million (US$128 million) of asset-backed securities in China as soon as this month. The securitised notes, due in 2020, are backed by automotive loan receivables and China International Capital is to be the sale's lead manager. This securitisation is to be the first backed by Chinese automotive loan receivables which has international ratings.

Source:
Bloomberg

Growth in China's auto sales has been rocketing the past few years, and due to the increase in sales and auto loans, there will be additional financing needs from auto finance companies. The transaction targets offshore investors and broadens the investor base beyond the country's borders for renminbi-denominated offerings, which helps the issuer to achieve better pricing.

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Brookstone bought by Chinese bidder

The bankrupt luxury-gadget retailer Brookstone has agreed to sell its assets to a group of Chinese buyers for more than US$173 million, after they outbid a unit of Spencer Spirit Holdings. A company backed by Chinese retail conglomerate Sanpower Group and Hong Kong-based private equity firm Sailing Capital won the auction on Wednesday. The unsecured creditors' recovery stood at 10% less than the Chinese deal because the buyers may close as many as 25 stores, creating more creditors to share from the same recovery pool, whereas Spencer would have only closed one store. The deal is scheduled for court approval on June 23 in Delaware.

Source:
Bloomberg

Brookstone filed for bankruptcy on April 3 with a deal to sell its assets to Spencer for US$146 million. The company had struggled to adapt to a changing retail landscape dominated by online competitors and consumers are cutting back on non-essentials. It will be interesting to see whether the Chinese buyers' business model will successfully turn the company around.

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