ZTE raising $10.7bn in loans but future still in doubt

ZTE raising $10.7bn in loans but future still in doubt

Two months after the US issued a denial order on ZTE and more than a week after it agreed a settlement, the company’s future is still unclear.

The company is raising $10.7 billion to fund its return to business – but its share price is falling and the US Congress is opposing President Donald Trump’s backing for a settlement.

At the same time an imminent trade war between the US and China – with tariffs being imposed by both sides – is likely to cloud the situation further.

Shares in ZTE resumed trading this week after it appeared the company had agreed a settlement with the US – by paying a $1 billion fine, with $400 million in escrow.

ZTE supplies telecoms equipment to fixed and mobile operators across the world, though not in the US. It uses hardware and software from US sources under licence – licences it broke by selling to Iran despite a US embargo.

Last week’s agreement calls for embedded US observers to monitor ZTE for 10 years, and for a complete change of senior management.

Now the company says it has nominated five new directors, Li Zixue, Li Buqing, Gu Junying, Zhu Weimin and Fang Rong, plus three non-executive directors, Cai Manli, Yuming Bao and Gordon Ng. They will replace a 14-person board, which will be removed under the terms of the US deal.

At the same time ZTE will apply for a $4.7 billion credit line from Bank of China and $6 billion from China Development Bank. However the company’s shares have fallen 30% on the Hong Kong and Shenzhen stock exchanges, a loss of $5.8 billion in only three days by the time trading closed on Friday.

Members of the US Congress – from both sides – are taking a strong anti-ZTE line and are opposing Trump’s settlement.

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