12/09/2020 Dianrong aims to raise $100m to cope with peer-to-peer crackdown | Financial Times

Online lending
Dianrong aims to raise $100m to cope with peer-to-peer crackdown
Chinese group taps investors after it was hit hard by regulatory curbs on sector

© Bloomberg

Henny Sender APRIL 15 2019

Dianrong, one of China’s biggest peer-to-peer lenders, is attempting to raise

$100m as it tries to weather a regulatory clampdown which has also prompted it to
cut up to 2,000 jobs.

The company is trying to raise the funds from both new investors and existing
shareholders, which include Singapore’s GIC; Orix, the Japanese financial services
group, and the Asian private equity arm of Standard Chartered.

To reassure the investors, Dianrong co-founder Kevin Guo put $10m of his own
money into the company at the end of December, he told the Financial Times. The
new capital is designed to help Dianrong to survive until Beijing gives accreditation
to a select number of lenders, which investors expect before the end of the year.

In the mean time, Dianrong has started cutting up to 2,000 jobs, about a third of
the total, to cut costs.

Dianrong’s fate, like that of the remaining P2P lenders — which connect private
lenders and borrowers online — depends largely on Beijing. The government was
originally expected to begin registering platforms this month. There is still no
information on the criterion or how many firms will receive licences.

“Whether this turnround works is up to the government,” said one potential

investor. “It is hard to keep raising capital and growing when the government
specifically imposes limits on both the borrowers and the lenders.”

Fitch Ratings said last week that it expected “more platforms to close or
consolidate this year” after new licensing rules were proposed. By January, there
were about 1,000 P2P lenders, down from about 2,350 in mid-2007, the credit
rating agency added, while monthly lending volumes have fallen by 60 per cent.

P2P bulls argue that as long as banks remain reluctant to lend to the smaller
enterprises that provide both jobs and consumption that China needs, online
marketplace lending has an important role to play.

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12/09/2020 Dianrong aims to raise $100m to cope with peer-to-peer crackdown | Financial Times

Dianrong’s two co-founders have solid pedigrees: Mr Guo previously practised law
and specialised in intellectual property rights. Soul Htite, a Canadian, helped
found California-based Lending Club, the leading US peer-to-peer platform that
went public in 2014.

In addition, Dianrong, which was established in 2012, boasts respected investors

that include one of the family offices of Jack Ma, Tiger Global, and Hong Kong’s
Sun Hung Kai as well as GIC, Orix and Standard Chartered.

As early as 2015, Dianrong was brimming with confidence that it would soon go
public; the following year, Mr Htite was talking of a $500m fundraising round
even as the listings atmosphere for mainland P2P companies soured.

But the company also grappled with fundamental disagreements about its strategy.
Mr Guo long advocated a conservative strategy while in contrast, Mr Htite wanted
to build scale quickly as a shortcut to a public listing.

Mr Guo, the legal face of Dianrong, is taking back the reins after a series of internal
mis-steps including an aborted merger with Quark Finance, a Chinese consumer
finance company, in a partnership that added both to costs and non-performing
loans.

Mr Htite dismissed reports about tension between him and Mr Guo around Quark
as “fake news”.

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