P2C Startup Itouzi Proposes Debt-to-Equity Swaps to Avert Defaults
Liao Shumin
/SOURCE : Yicai
P2C Startup Itouzi Proposes Debt-to-Equity Swaps to Avert Defaults

(Yicai Global) July 19 -- China's peer-to-corporation lending platform Itouzi has proposed debt-to-equity swaps for overdue loan projects to lower the risk of defaults.

Itouzi suggests launching equity investment funds, as well as merger and acquisition funds, both of which target borrowers, the Beijing-based financial technology startup said in the statement, adding that debt-to-equity swaps would help small and medium-sized firms to reduce their liabilities and recover lenders' funds within 36 months.

Online peer-to-peer and peer-to-corporation lending, where investors side-step traditional lenders such as banks to lend directly to borrowers, has expanded quickly in China in the past few years. At its peak in 2015, there were more than 5,000 platforms. But the industry fell into disrepute after scandals such as the Ezubao 'ponzi scheme' that stripped investors of more than USD7.6 billion.

The tight liquidity of borrowers, including large listed companies, has caused private firms in upstream and downstream businesses to encounter a chain reaction, ITouzi said, adding that these companies need time and help to resolve their liquidity pressures.

The online lender has facilitated transactions worth CNY41.7 billion (USD6.2 billion), with an outstanding loan of CNY13.4 billion. Some 260,000 individual lenders have used the platform and almost half of them still have their money in it, the website shows.

Founded in 2013, Itouzi raised USD10 million in its A-round in 2015 from Delta Capital, a Chinese equity investor. The second round came in 2016, when the company raised USD36 million in B-round from another Chinese firm Sino Fortune and an individual investor.

The China Banking and Insurance Regulatory Commission held a meeting on July 16 to address the issues of the P2P lending sector and to draft new rules, which are rumored to come out this month or next.

Editor: Emmi Laine

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Keywords: Internet Loan Platform , P2P , Debt Default , Debt-For-Equity Swaps , P2C , Online Lending , Shadow Banking , Ponzi Scheme