Nickel Tycoon Reaches Deal With Banks to Avoid Margin Calls
(Bloomberg) -- The Chinese nickel tycoon whose big short position caused chaos reached a deal with his banks to avoid further margin calls, marking a key step toward restoring stability to the market after an unprecedented squeeze.
Xiang Guangda has been in discussions with banks led by JPMorgan Chase & Co. about a loan facility to backstop his short position, which has roiled the nickel market after he struggled to pay massive margin calls to banks and brokers last week. The London nickel market has been closed since last Tuesday morning, when the exchange intervened after prices spiked as much as 250% in two days, and the standstill announced by Xiang’s Tsingshan Group Holding Co. could provide the certainty needed to restart trading.
Tsingshan’s banks agreed they won’t close out positions against the company or make further margin calls during a standstill period, the company said in a statement on Monday. The two sides will also continue discussions about a secured credit facility to cover the company’s nickel margin and settlement requirements.
The agreement also allows for Tsingshan to reduce its positions “in a fair and orderly manner as abnormal market conditions subside,” the company said.
The LME last week attempted a process to try to close out short positions by matching market participants with long and short positions before the market reopened, but received little interest. Xiang told the banks and brokers last week that he would like to keep his short position, Bloomberg reported at the time.
Tsingshan’s difficulties paying its margin calls have put its banks and brokers in a bind, as they have had to make hefty margin calls of their own at the LME to cover their short positions on the exchange.
JPMorgan is the biggest counterparty to Xiang’s nickel trades, people familiar with the matter said last week. About 50,000 tons of his total nickel short position of over 150,000 tons was held through an over-the-counter position with JPMorgan.
The other banks and brokers include BNP Paribas SA, Standard Chartered Bank Plc, CCB International Holdings, ICBC Standard Bank Plc, United Overseas Bank Ltd., DBS Group Holdings Ltd., BOC International Holdings Ltd. and brokerage Sucden Financial Ltd.
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