Recently, sources in the trust industry have learned that Central Plains Yuzi Investment Holding Group Co., Ltd. has disclosed that its listed subsidiary Palm Eco-Town Development Co., Ltd. is being sued by Shanghai International Trust Co., Ltd. over a defaulted PPP trust loan that was established years ago, with the principal and interest involved totaling approximately 322 million yuan. The lawsuit also highlights the mounting debt resolution pressures facing existing PPP projects.
According to the listed company's public announcement, the underlying asset in this dispute is the PPP project for the second phase of landscaping construction for the creation of national and provincial garden cities in Jishou City, Hunan Province. Shanghai International Trust issued trust loans to the project's SPV entity, Jishou Zongji Engineering Construction Project Management Co., Ltd., in two tranches in August 2017 and February 2018, with a cumulative lending amount of 435 million yuan, all of which was used for the construction and operation of the landscaping PPP project.
To safeguard the trust's creditor rights, the transaction was structured with multiple credit enhancement arrangements. Palm Eco-Town signed a shortfall compensation agreement, pledging to fulfill an unconditional obligation to cover any shortfall if the trust principal and interest could not be fully recovered. Additionally, the project company pledged all project revenues and accounts receivable under the 2017-2033 concession agreement to Shanghai International Trust as repayment security.
Subsequently, project returns fell short of expectations, and the borrower failed to fulfill its principal and interest repayment obligations as stipulated in the contract. Shanghai International Trust, in accordance with the contract terms, declared the entire trust loan due immediately and filed a lawsuit with the court, seeking an order for Jishou Zongji to repay the remaining principal of 257 million yuan, along with corresponding interest and penalty interest. The trust also claimed that Palm Eco-Town should bear joint and several liability under the shortfall compensation agreement, and requested priority rights to the pledged project accounts receivable. Additionally, it sought to have the defendants cover legal fees and litigation costs, with the total claim amount tentatively calculated at approximately 322 million yuan.
The announcement shows that the litigation claim amount accounts for 76.49% of Palm Eco-Town's net assets at the end of 2025. The case has been accepted by the court but has not yet gone to formal trial, and the final judgment remains highly uncertain. If the listed company loses the case and is required to bear joint and several liability, it would have a significant impact on the company's cash flow and financial condition.
Public records show that Central Plains Yuzi is a key provincial-level state-owned capital platform in Henan Province, with Palm Eco-Town as its listed subsidiary, which previously had extensive involvement in PPP municipal garden projects across multiple regions nationwide. In recent years, Palm Eco-Town has faced multiple PPP-related lawsuits, with some project returns falling short of expectations, and operational and debt pressures have continued to surface. This trust lawsuit serves as another typical case of risk exposure in existing PPP projects.
Industry insiders noted that PPP projects that were launched on a large scale in earlier years are now entering their repayment cycles, and some projects are prone to financing defaults due to fiscal payment schedules and underperforming project operating returns. Trust institutions are relying on credit enhancement tools such as shortfall compensation and accounts receivable pledges to pursue their claims, but PPP project repayments are highly dependent on local government fiscal performance, and the pledged concession accounts receivable are difficult to actually dispose of or liquidate, leaving the ultimate recovery of creditor rights uncertain.
As of now, Shanghai International Trust, Central Plains Yuzi, and Palm Eco-Town have not disclosed whether they are engaged in debt settlement or restructuring negotiations. Further announcements are still awaited regarding the court hearing, the judgment outcome, and the progress of the company's debt resolution efforts.