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"Chinese firm says won't pay Goldman on options losses

Published:

"Chinese firm says won't pay Goldman on options losses

"BEIJING, Dec 29 (Reuters) - A small Chinese power generator on Tuesday rejected demands from a Goldman Sachs unit to pay for nearly $80 million lost on two oil hedging contracts, part of a long-running dispute over how China deals with derivatives losses.

Goldman Sachs (GS.N) was one of the foreign banks, along with Citigroup (C.N), Merrill Lynch and Morgan Stanley (MS.N), blamed by the state assets watchdog for providing "extremely complicated" and difficult to understand derivatives products. [ID:nPEK242617]  

Shenzhen Nanshan Power (000037.SZ) (200037.SZ) said in a statement that it received several notices from J. Aron & Company, a trading subsidiary of Goldman Sachs (GS.N), for at least $79.96 million as compensation for terminating oil option contracts.

"We will not accept the demand by J. Aron for all the losses and related interests," said Nanshan, in line with the stance it took last December.

"We will try our best to negotiate with J. Aron and resolve the dispute peacefully...but the possibility of using a lawsuit can not be ruled out when talks fail," it added.

"J. Aron told us in one notice that if we do not pay the money, they will reserve the right to launch a lawsuit and will not send us any further notice."

The State Assets Supervision and Administration Commission said in September that it would back state-owned companies in any legal action against the foreign banks that sold them oil derivatives, which resulted in losses when oil prices dived late last year. [ID:nPEK14474]

A Beijing-based Goldman Sachs corporate communication official declined to comment.

Nanshan said in October last year that two oil option-related contracts with J. Aron were signed by its officials without authorisation from the company. In December 2008 it said in a statement it had terminated the deals, and that it would not accept J. Aron's demand for payment.

LONG-TIME TUSSLE

Many Chinese firms, especially airliners, suffered huge losses from complex oil options trading last year as oil price collapsed to nearly $30 a barrel.

A senior official from SASAC revealed last month that 68 Chinese firms suffered net losses of 11.4 billion yuan ($1.67 billion) by October 2008 on call and put options signed with foreign banks.

So far no legal action has been taken and many lawyers and industry analysts believe that Chinese firms and their foreign banks are quite likely to settle their disputes privately or through arbitration, similar to a handful of previous cases in the mid-1990s.

Only 31 firms are authorised in China to trade derivatives directly in the overseas market and the regulators started strictly prohibiting others from such trading since early 2009 after losses were exposed.

SASAC said last month that it had suggested companies without overseas derivatives trading licences trade on the domestic market or through domestic financial institutions."

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Entry #1,572

Comments

1.
JAP69Comment by JAP69 - December 29, 2009, 7:15 pm
HUHHHHHHHHHH
They would not be sore losers would they. Been smilin all the way to the bank if they came out the winner.
2.
konaneComment by konane - December 29, 2009, 9:04 pm
Thanks JAP! Don't think the bank's been paying as it should from the article below. This is the only source for information about the liens so haven't been able to do any check, double checks. Interesting reading anyway.   

$47 TRILLION LIEN AGAINST U.S. TREASURY AND FED
SHOWDOWN TAKES A DECISIVE TURN AS THE CHINESE AND MI-6 TURN THE S<snip>W
Monday 14 December 2009 02:30
http://worldreports.org/news/251_47_trillion_lien_against_u.s._treasury_and__fed

TREASURY SECRETARY ‘READ HIS RIGHTS’ AND TAGGED
FORMER TREASURY SECRETARY PAULSON FORCIBLY TAKEN BY MI-6 TO BERMUDA
Wednesday 16 December 2009 07:00
http://worldreports.org/news/252_treasury_secretary_read_his_rights_and_tagged
3.
JAP69Comment by JAP69 - December 29, 2009, 10:07 pm
Makes you wonder if the rush on the health bill is to tax for 4 years with no benefits paid out. I doubt if the bill is passed that the money collected will be going into a reserve acct until benefits are paid.
All these money deals need to be brought out into the open for all to see the mess.
4.
konaneComment by konane - December 29, 2009, 11:26 pm
Thanks JAP! I'll quote World Reports on health care:

"• Step forward, Mammon.

(8): Passage of the Obama 'health care' legislation will self-evidently release a permanent flow of cash which will be ripe for diversion and use as the base for further reviving of the Fraudulent Finance derivatives carousel: which is the underlying object of the exercise. The bill is Leninist and far exceeds what Lenin had in mind, or his successors actually got round to implementing.

TBARACK OBAMA FACES VETERANS’ DAY DEADLINE TO COMPLY
OR CHINA CAN EXERCISE ITS WORLD COURT LIEN ON THE U.S. TREASURY
Saturday 7 November 2009 04:30
http://worldreports.org/news/245_barack_obama_faces_veterans_day_deadline_to_comply
5.
Rick GComment by Rick G - December 30, 2009, 8:41 am
Have to agree with JAP...four years of taxation for a future "benefit" sounds like a ponzi scheme to me. Kind of like Social Security ;)

6.
konaneComment by konane - December 30, 2009, 9:56 am
Thanks Rick! Yes agree totally. Didn't pass the smell test for me years ago when they started talking about it. We've found in recent years government serves itself first then tosses out crumbs ... if there are any left. There won't be.

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