BORROWINGS

9 Months Ended

Sep. 30, 2012

BORROWINGS [Text Block]

5.	BORROWINGS
	Borrowings consist of the following:

Short-term borrowings	September 30, 2012					December 31, 2011
	Interest					Interest
	rate		Maturity date		Balance	rate	Maturity date		Balance
Lender
Xichen Song	14.40%		December 15, 2012		29,036,539				-
Sungeng Ye	28.80%		September 28, 2013		2,365,500				-
Subtotal				$	31,402,039			$	-
Entrusted bank loans
China CITIC Bank					-	1	January 27, 2012		47,613,000
Subtotal		$		$	-			$	47,613,000
Short-term bank loans
China Construction Bank						2	April 18, 2012		1,904,520
China CITIC Bank						3	April 13, 2012		5,554,850
China CITIC Bank	7.87%		October 5, 2012		3,942,500				-
China CITIC Bank	7.87%		October 17, 2012		3,154,000				-
Minfu Small-scale Credit Co, ltd.	18.00%		February 23, 2013		4,731,000				-
Minfu Small-scale Credit Co, ltd.	18.00%		February 26, 2013		788,500				-
Guangdong Development Bank					-	4	January 15, 2012		2,698,070
China Minsheng Bank					-	5	August 1, 2012		3,174,200
China Minsheng Bank	6.44%		October 23, 2012		3,154,000				-
Chouzhou Bank	7.80%		June 21, 2013		4,731,000				-
Subtotal				$	20,501,000			$	13,331,640
				$	51,903,039			$	60,944,640

Long-term loan within one
year, related party	September 30, 2012				December 31, 2011
	Interest				Interest
Lender	rate	Maturity date		Balance	rate	Maturity date		Balance
Shaoping Lu	12.00%	March 1, 2013	$	4,250,000	12.00%	March 1, 2013	$	4,250,000
Subtotal			$	4,250,000			$	4,250,000

¹ Floating rate, 258% of basis interest rate of PBOC, 16.5% as of December 31, 2011
² Floating rate, 115% of basis interest rate of PBOC, 7.26% as of December 31, 2011
³ Floating rate, 120% of basis interest rate of PBOC, 7.87% as of December 31, 2011
⁴ Floating rate, 110% of basis interest rate of PBOC, 6.71% as of December 31, 2011
⁵ Floating rate, 120% of basis interest rate of PBOC, 7.87% as of December 31, 2011

The weighted average interest rate for the outstanding short-term loans was 13.46% and 14.53% as of September 30, 2012 and December 31, 2011, respectively.

As of September 30, 2012, short-term borrowing amounting to $3,942,500 from China CITIC Bank was secured by a pledge of commercial properties amounting to $3,883,436 and guaranteed by Lianmo Wu, the Company’s Chairman, President and controlling stockholder. The short-term loan amounting to $3,154,000 from China Minsheng Bank, was pledged by commercial properties amounting to $5,160,712 and guaranteed by the Company’s Chairman and controlling stockholder, Lianmo Wu, and his wife Chushing Cheung. The short-term loan amounting to $3,154,000 from China CITIC Bank was pledged by commercial properties amounting to $3,957,614 and guaranteed by the Company’s Chairman and controlling stockholder, Lianmo Wu, and his wife Chushing Cheung. The short-term loan totaling $5,519,500 from Minfu Small-scale Credit Co, Ltd. was guaranteed by The Fifth Season Shandong Commercial Investment Co., Ltd. and Guangzhou Jiezhimeng Energy and Technology Co, Ltd. The short-term loan amounting to $4,731,000 from Chouzhou Bank was pledged by commercial properties amounting to $10,406,643 and guaranteed by Hangzhou Hengding Plastic Wood Tools Co., Ltd., Hangzhou Yinli Decorative Lighting Co., Ltd., the Fifth Season Hangzhou Department Store Investment Management Co., Ltd., Lianmo Wu, Chushing Cheung, Weidong Zhong, Xiaolan Yuan, Lide Zhu and Wenwei Shan. The short-term loan from Xichen Song amounting to $29,036,539 was guaranteed by Zibo Mintai Property Development Co., Ltd. The short-term loan from Sungeng Ye was pledged by commercial properties amounting to $1,100,647 and guaranteed by Lianmo Wu, the Company’s Chairman, President and controlling stockholder. The borrowing of $4.25 million from Shaoping Lu was guaranteed by Mr. Wu and Ms. Cheung.

The interest expenses were $7,556,162 and $6,966,754 for the nine months ended September 30, 2012 and 2011, respectively, and $2,028,074 and $2,691,836 for the three months ended September 30, 2012 and 2011, respectively.

The weighted average amounts of the borrowings were $64,870,676 for the nine months ended September 30, 2012.

The loans amounting to $3,942,500 and $3,154,000 respectively from China CITIC Bank have been repaid in October 2012. The loan amounting to $3,154,000 from China Minsheng Bank was also repaid after the maturity date. During the period that the loan was in default, the Group was required to pay an additional interest penalty charged at 50% of the interest rate defined in the original loan agreement. On May 25, 2012, Longyun borrowed $15,770,000 in total from Minfu Small-scale Credit Co, Ltd., at an interest rate of 14.4% per annum for a term of 90 days in order to help Shandong TFS meet its obligations under the entrustment loan to Shengli Steel. The Company sought an extension of the repayment date for this loan before it became due. The roll-over contract renewed the term of interest rate at 18.00% per annum. In the third quarter, Longyun repaid $10,250,500 and as of September 30, 2012, the balance of the loan was $5,519,500 in total.