Aug 1 (Reuters) - Citigroup Inc said on Friday it has started proceedings in commercial court in London to enforce its rights over $285 million of financing at two ports in China, where metals are believed to have gone missing.
Citigroup said it initiated the action on July 22 after a business counterparty and a Chinese warehouse provider commenced action in British courts to establish their rights.
Citigroup's disclosure, made in a quarterly financial filing with the U.S. Securities and Exchange Commission, did not name the counterparty or the warehouse operator.
Standard Chartered, China's CITIC Resources Holdings Ltd, Shanxi Coal International Energy Group and other firms have also made legal claims over metals financing since May. That was when Chinese authorities began investigating whether a private trading firm, Decheng Mining, and its related companies, used fake warehouse receipts at Qingdao Port to obtain multiple loans secured against a single cargo of metal.
Citigroup said it has provided about $400 million of financing for metals stored at ports in China, of which $285 million was at Qingdao and Penglai, another port where fraud is suspected. The sums represent less than 1 percent of Citigroup's corporate loan portfolio.
Citigroup said it provided the financing to clients that were non-Chinese subsidiaries of large multi-national corporations and the contracts were guaranteed by the parent companies.
It said it had no direct exposure to local Chinese counterparties and did not record any losses for the financing in the second quarter.
Citigroup Chief Financial Officer John Gerspach had said on July 18 that the global bank had about $280 million of exposure in the scandal but it believed the problems were isolated and concerned "those very specific locations." (Reporting by David Henry in New York; Editing by Bernadette Baum)