Puda Coal Chairman Sells Half the Company; Pledges the Other Half to Chinese PE Investors

Alfred Little submits:

Chinese RTO Puda Coal, Inc (PUDA) Chairman Ming Zhao transferred the ownership of PUDAs sole Chinese operating entity, Shanxi Puda Coal Group Co., Ltd (Shanxi Coal), to himself in 2009 without shareholder approval according to official government filings. Then, in 2010, Zhao sold 49% and pledged the other 51% of Shanxi Coal to CITIC Trust Co., Ltd (CITIC), a Chinese private equity fund, for RMB245 million ($37.1 million).

Zhao then recklessly leveraged Shanxi Coal by borrowing RMB3.5 billion ($530.3 million) from CITIC at an incredibly high 14.5% annual interest rate (including fees) to finance the development of its coal mines. PUDA shareholders are completely unaware of these transactions that decimate the value of its U.S. listed shares.

Background An Industry Facing Government Mandated Consolidation

According to PUDAs 2010 10-K filing:

In order to improve production efficiency, workplace safety and to reduce coal mine accidents, the Shanxi provincial government issued


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