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 DT Asia Investments Limited

Room 703, 7/F.,

Beautiful Group Tower,

77 Connaught Road Central, Hong Kong

(852) 2110-0081

 

VIA EDGAR

 

June 17, 2016

 

U.S. Securities and Exchange Commission

Office of Financial Services

100 F Street, N.E.

Mail Stop 4720

Washington, DC 20549

Attn: Christian N. Windsor, Special Counsel

 

  RE: DT Asia Investments Limited

Revised Preliminary Proxy Statement on Schedule 14A

Filed June 8, 2016

File No. 001-36664

 

Dear Mr. Windsor:

 

DT Asia Investments Limited (the “Company”, “it”, “we”, “us” or “our”) pursuant to conversations with the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) hereby supplements and transmits its response to the letter received by us from the Staff of the Commission dated June 13, 2016 and responded to on June 15, 2016 regarding our Amendment No. 2 to our Preliminary Proxy Statement on Schedule 14A (the “Proxy Statement”) previously filed on June 8, 2016. Select pages of the Proxy Statement are enclosed as Exhibit A herewith showing our proposed changes to the Proxy Statement in response to our discussion with the Staff on June 17, 2016.

 

For your convenience, we have repeated below the relevant Staff’s comments in bold and have followed each comment with the Company’s response.

  

China Lending Group Management's Discussion and Analyses of Financial Condition and Results of Operations, page 179

 

Loan Categorization at China Lending Group, page 181

 

  2. You state the increase in your provision for loan losses for the period ending March 31, 2016 was primarily attributed to “increases in revenue with an increase in delinquent amount of loan receivables as well as interest and fees.” We note that your allowance for loan loss increased from December 31, 2015 at $2,208,708 to March 31, 2016 at $4,046,050. It appears that your loan asset quality has improved as evidenced by declines in loans past due 90 days or greater noted on page F- 69 and impaired loans on page F-72. Please revise your disclosure to better explain the factors driving the increases in the provision for loan losses and the overall allowance for loan losses given the credit trends disclosed.

 

In response to the Staff’s comment, we propose to revise the disclosure on pages 181 and 186 of the Proxy Statement to read:

 

Provision for loan losses increased by $1.8 million to $1.8 million during the first three months in 2016 as compared to the same period in 2015, and increased by $1.6 million, or 270.7%, to $2.2 million for the year ended December 31, 2015, as compared to $0.6 million for the year ended December 31, 2014. These increases in provision for loan losses were mainly attributable to some of the delinquent loans and interest receivable during these periods, in which China Lending Group has increased provision percentages and amounts to reflect the repayments expected to be provided by the collateral, pledged assets and guarantees, which weakened as a result of legal proceedings and difficulties in enforcing the collateral and guarantees for four cases that management believes are isolated and involve unique circumstances not indicative of systemic issues.

 

 

 

Christian N. Windsor, Special Counsel

U.S. Securities and Exchange Commission

June 17, 2016

 

Page 2

 

Furthermore, in response to the Staff’s comment, we propose to revise the disclosure on page 160, 190, F-41 and F-72 and of the Proxy Statement.

 

In response to the Staff’s request, please find a summary description of each loan in which China Lending Group had difficulty enforcing the collateral or guarantee.

 

Loan #1

 

China Lending Group made a personal loan backed by collateral that was registered in another province other than Xinjiang province. When China Lending Group conducted its due diligence before dispersing the loan, the collateral was properly registered to the borrower when in fact the borrower had previously sold the collateral before engaging China Lending Group for the loan. In committing fraud, the borrower had timed the request to ensure that China Lending Group would not see the transfer of the proposed collateral. When China Lending Group subsequently filed its paperwork for the collateral, the borrower was no longer listed as the owner of the collateral. China Lending Group considers this an isolated incident, but has adopted a policy of limiting to special cases loans where the collateral is outside of Xinjiang province.

 

Loan #2

 

China Lending Group made two business loans to the same company which used a privately-held guarantee company to guarantee the loans. Subsequent to due diligence and disbursement of the loan, the privately-held guarantee company was investigated for alleged misappropriation of funds. Going-forward in an attempt to increase guarantee quality, China Lending Group is requesting borrowers who need guarantees use a state-owned or public guarantee company. Currently the majority of the loan portfolio uses state-owned and public guarantee companies, when necessary. As the average loan duration in the portfolio is less than a year, upon renewal and also for new applicants, all borrowers will be requested to use state-owned or public guarantors and the percentage of loans guaranteed by state-owned and public guarantee companies will increase.

 

Loan #3

 

China Lending Group made a loan to business for financing between the expiration and start of a new loan with the same bank. In China, common practice for businesses is to have a one-year loan from a bank. Upon the expiration of the loan, the loan must be paid in-full and subsequently a new loan is issued. China Lending Group conducted due diligence, including receiving oral confirmation from the bank as well as the borrower that a subsequent loan would be issued to the borrower. China Lending Group dispersed the loan, but the oral confirmation was revoked by the bank and subsequently the borrower had greater difficulty repaying the loan. China Lending Group prefers not to engage in bridge financing, but if it were to in the future, it would require a written document from the bank showing that the subsequent loan has been approved before dispensing the bridge loan.

 

Loan #4

 

China Lending Group made a business loan that was backed by both a corporate and personal guarantee. The corporation was engaged in a seasonal-based business and the personal guarantee was backed by holdings of a forest property. With the difficulties facing the Chinese economy, the corporation was unable pay. China Lending Group, though it believed the forest property adequately covered the loan, took a reserve as selling the forest property could take upward of 18 months to sell. Going forward, China Lending Group does not wish to engage in and will heavily scrutinize collateral that is relatively illiquid.

 

 

 

Christian N. Windsor, Special Counsel

U.S. Securities and Exchange Commission

June 17, 2016

 

Page 3

 

Loan Impairment, page F-40

 

  7. We note troubled debt restructurings were $4,116,025 and $4,143,021 as of December 31, 2015 and March 31, 2016, respectively. Please address the following:

 

  Revise to include the disclosures required by ASC 310-10-50-33 and 50-34.

 

In response to the Staff’s comment, we propose to revise the disclosure on pages F-40, F-41 and F-72 of the Proxy Statement to add, where appropriate, the following:

 

The impaired amounts of personal loans were $4,254,664 and $nil as of December 31, 2015 and December 31, 2014, respectively. The impaired amounts of business loans were $10,468,752 and $nil as of December 31, 2015 and December 31, 2014, respectively.

  

The impaired amounts of personal loans were $2,128,880 and $4,254,664 as of March 31, 2016 and December 31, 2015, respectively. The impaired amounts of business loans were $7,126,244 and $10,468,752 as of March 31, 2016 and December 31, 2015, respectively.

 

A loan is considered to be a troubled debt restructuring loan when that is restructured or modified for economic or legal reasons, where these conditions are present: 1) The Company grants a concession that it otherwise would not consider and 2) The borrower is having financial difficulties. Under unusual circumstance, in order to reduce the potential losses on troubled debt, the Company may consider granting concession to borrowers with financial difficulties which has significant delay or significant shortfall in amount of payments. In order to deter troubled debt restructurings, stringent scrutiny and approval from the Company’s Loan Review Committee is required prior to the granting of concession on troubled debt.

 

The troubled debt restructuring amounts of personal loans were $1,035,168 and $nil as of December 31, 2015 and December 31, 2014, respectively, after providing one time concession on interest amounting to $26,627 and providing an allowance for loan loss amounting to $26,998. The trouble debt restructuring amounts of business loans were $3,080,857 and $nil as of December 31, 2015 and December 31, 2014, after providing concession on interest amounting to $22,175 and providing an allowance for loan loss amounting to $73,129.

The trouble debt restructuring amounts of personal loans were $1,041,957 and $1,035,168 as of March 31, 2016 and December 31, 2015, having provided allowance for loan loss amounting to $330,262 and $26,998, respectively. The trouble debt restructuring amounts of business loans were $3,101,064 and $3,080,857 as of March 31, 2016 and December 31, 2015, having provided allowance for loan loss amounting to $775,266 and $73,129, respectively. The March 31, 2016 troubled debt restructuring amounts were the exact balances brought forward from December 31, 2015 after adjustment in foreign exchange. The increase in allowances in the troubled debt restructuring both in personal loans and business loans in March 31, 2016, as compared to that of December 31, 2015, was mainly attributable to the new information on the troubled debt restructuring loans the Company obtained during the first three months of 2016.

 

As of December 31, 2015 and 2014, there were no receivables derecognized for the real estate related investment obtained from collateral.

 

As of March 31, 2016 and December 31, 2015, there were no receivable derecognized for the real estate related investment obtained from collateral.

 

 

 

Christian N. Windsor, Special Counsel

U.S. Securities and Exchange Commission

June 17, 2016

 

Page 4

 

  Disclose your accounting policy for when you would exclude loans from classification as troubled debt restructurings. For example, clarify whether a loan will remain classified as a troubled debt restructuring for the entire time it remains outstanding, or clarify whether the troubled debt restructuring designation can be removed prior to complete pay-off of the loan. In this regard, we note your disclosure that $10.7 million of loans were granted a one-time extension in 2014, but nil loans were classified as troubled debt restructurings as of December 31, 2014.

 

In response to the Staff’s comment, we propose to revise the disclosure on pages F-41and F-72 of the Proxy Statement to add the following:

 

“Due to the nature of the Company’s operation and the interest concessions granted, the troubled debt restructuring designation will not be removed  until the loan is paid-off or otherwise disposed of.”

 

The Company reported its first troubled debt restructuring in December 31, 2015. The Company has not removed any loan classified as a troubled debt restricting from that classification.”

 

We thank the Staff for its review of the foregoing. If you have further comments, we ask that you forward them by electronic mail to our counsel, Stuart Neuhauser at sneuhauser@egsllp.com or by telephone at (212) 370-1300.

 

  Very truly yours,
   
  /s/ Stephen N. Cannon
 

Stephen N. Cannon

President and Chief Executive Officer

 

cc: Stuart Neuhauser, Esq.
Ellenoff Grossman & Schole LLP

 

 

 

Exhibit A

 

Proposed Changes to Proxy Statement