SEC Company Response from Yiren Digital (YRD) — Dec 7, 2015
Yiren Digital Ltd.
Date: Dec. 7, 2015 · CIK: 0001631761 · Accession: 0001193125-15-396640
AI Filing Summary & Sentiment
File numbers found in text: 333-208056
Referenced dates: December 2, 2015
Letter
Division of Corporation Finance Securities and Exchange Commission Registration Statement on Form F-1 Amendment No. 2 to Registration Statement on Form F-1 Filed November 16, 2015 and November 23, 2015 File No. 333-208056
Dear Mr. King, Mr. Lin, Mr. Pande and Mr. Phippen:
On behalf of our client, Yirendai Ltd., a foreign private issuer organized under the laws of the Cayman Islands (the “Company”), we submit to the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) this letter setting forth the Company’s responses to the comments contained in the Staff’s letter dated December 2, 2015. Concurrently with the submission of this letter, the Company is publicly filing amendment no. 2 to its registration statement on Form F-1 (the “Registration Statement”) and certain exhibits via EDGAR.
To facilitate your review, we have separately delivered to you today five courtesy copies of the Registration Statement, marked to show changes to the Registration Statement filed with the Commission on November 23, 2015, and five copies of the filed exhibits.
Securities and Exchange Commission
December 7, 2015
Page
The Company respectfully advises the Staff that it plans to file another amendment to the Registration Statement to include the estimated offering size and price range for the offering on December 8, 2015 and commence the marketing process immediately thereafter if the Staff has no objection to this plan, and would greatly appreciate the Staff’s continuing support and assistance.
With respect to the Staff’s questions and comments relating to the trust that the Company established a business relationship with recently, the Company respectfully advises the Staff that this relationship is new and evolving, and the Company does not expect this relationship to materially affect the Company’s business and financial condition in the foreseeable future. The Company currently is not in a position to provide a definitive accounting analysis and conclusion of the trust arrangement due to its new and evolving nature, although the Company is certain that it does not have any impact on the Company’s historical financials for the periods presented in the Registration Statement. In response to the Staff’s comments, the Company has made its best efforts to answer factual questions raised by the Staff, as indicated in the responses below. However, the Company would appreciate the Staff’s understanding that the Company is not able to provide a definitive accounting analysis and conclusion at this time, and the Company will do so in the future when it needs to report financial results for the fourth quarter of 2015.
The Staff’s comments are repeated below in bold and are followed by the Company’s responses. We have included page references in the Registration Statement where the language addressing a particular comment appears. Capitalized terms used but not otherwise defined herein have the meanings set forth in the Registration Statement.
Amendment No. 1 to Registration Statement on Form F-1
Our Business, page 1
1. You state here and throughout the document that you target prime borrowers, comprising credit card holders with salary income. Since the term “prime borrower” may have different meanings by country and types of lending, please revise to clearly disclose how you define prime borrowers (e.g. does a brand new credit card holder with salary income meet your definition or a person who is significantly past due on their credit card payments, but with salary income).
In response to the Staff’s comment, the Company has revised its disclosure on pages 1, 82, 117 and 124 of the Registration Statement to clarify that the Company’s targeted prime borrowers comprise credit card holders with stable credit performance and salary income. The Company respectfully advises the Staff that in determining whether a prospective borrower has stable credit performance and salary income, the Company reviews such borrower’s credit card statement for the last six months and/or credit report from the PBOC for the last five years, as well as the borrower’s salary for the last six months. If a person is three months or more past due on his or her credit card payments or loan payments, such person would not fall within the scope of the Company’s targeted prime borrowers. On the other hand, if the credit profile of a brand new credit card holder indicates that the person has stable credit performance and salary income, he or she will be considered as the Company’s targeted prime borrower.
Securities and Exchange Commission
December 7, 2015
Page
However, a prospective borrower on the Company’s platform must first meet the definition of a prime borrower and then meet additional minimum borrower qualification standards for each of the four segments under the Company’s pricing grid, which standards have been disclosed in detail on page 134 of the Registration Statement.
Summary Consolidated Financial and Operating Data, page 11
2. We note your disclosure on pages 12, 80 and 89 of “transaction fees from borrowers”, “service fees from investors” and the subtotal of these fees and others as “fees earned”. However, the amounts disclosed are significantly higher than the amounts reported in your Consolidated Statements of Operations for the nine-months ended September 30, 2015. We further note your revenue recognition policy beginning on page F-37. Please revise the terms “transaction fees from borrowers”, “service fees from investors” and “fees earned” throughout the document and provide detailed disclosure to make it clear to a reader that these amounts are not equivalent to revenues or any other financial metric that is presented in your financial statements.
The Company respectfully advises the Staff that the Company believes the terms “transaction fees from borrowers,” “service fees from investors” and “fees earned” reflect the actual status of fees collected by the Company and are straightforward, intuitive and useful to investors to provide investors with the relevant information as to how the Company charges and collects its fees from borrowers and investors on its platform. In order to avoid any confusion, the Company has added a footnote on each of pages 12 and 80 of the Registration Statement to clarify that “transaction fees from borrowers,” “service fees from investors” and “fees earned” are not equivalent to revenues or any other financial metric that is presented in the Company’s financial statements.
Securities and Exchange Commission
December 7, 2015
Page
Risk Factors – Risks Related to Our Business, page 14
3. We note your disclosure on page 15 that the People’s Bank of China together with nine other PRC regulatory agencies jointly issued the Guidelines on Promoting the Healthy Development of Internet Finance. You state that the Guidelines established the primary regulator and prohibited online-peer-to-peer lending service providers from illegal fund-raising and providing credit enhancement services. However, other statements appear to suggest that additional laws and regulations may be expected. For example, you state that the Guidelines mentioned above only set out the basic principles and new rules and regulations will be adopted in the future. Please revise your disclosures here and beginning on page 143 to address the following:
•
Clarify what the current laws, regulations and governmental policies related to your industry are and describe how you are in compliance. If you determine that you are currently not in compliance with current laws, regulations and governmental policies, tell us how you considered the disclosure requirements of ASC 450.
The Company respectfully advises the Staff that currently the PRC government has not promulgated any specific rules, laws or regulations to specially regulate the peer-to-peer lending service industry. The Guidelines on Promoting the Healthy Development of Internet Finance jointly issued by the People’s Bank of China together with nine other PRC regulatory agencies in July 2015 (the “Guidelines”), introduced formally for the first time the regulatory framework and basic principles for administering the peer-to-peer lending service industry in China. The Guidelines was not accompanied by any implementing rules, but rather, the Guidelines urge the relevant regulatory agencies to adopt implementing rules at the appropriate time. However, there are certain other rules, laws and regulations relevant or applicable to the peer-to-peer lending service industry, including the PRC Contract Law, the General Principles of the Civil Law of the PRC, and related judicial interpretations promulgated by the Supreme People’s Court. The Company has disclosed brief summary of the Guidelines and such other relevant and applicable PRC rules and regulations in the section “Regulation—Regulations Relating to Online Peer-to-Peer Lending” beginning on page 143 of the Registration Statement.
Securities and Exchange Commission
December 7, 2015
Page
To be compliant with existing rules, laws, regulations and governmental policies relating to the peer-to-peer lending service industry, the Company has implemented various policies and procedures, including without limitation the following:
(i) the Company acts only as an information intermediary, and does not use its own capital to invest in loans facilitated through its online marketplace;
(ii) the Company does not commit to provide guarantees to investors under any agreement for the full return of loan principal and interest;
(iii) the Company does not hold investors’ funds and funds loaned through the Company’s platform are deposited into and settled by a third-party custody account managed by a qualified bank, China Guangfa Bank;
(iv) the Company has obtained the ICP license as an internet information provider from the relevant local counterpart of the MIIT in accordance with applicable laws;
(v) the Company fully discloses all relevant information to investors and borrowers, such as disclosures to borrowers regarding interest rates, payment schedule, transaction fees, and other charges and penalties; and
(vi) the Company has been making strong effort to maintain the security of its platform and the confidentiality of the information provided and utilized across its platform.
In light of the above, the Company believes that it is in compliance with current rules, laws, regulations and governmental policies. In response to the Staff’s comment, the Company has revised the disclosure on pages 15 through 17 of the Registration Statement to further clarify the current rules, laws, regulations and governmental policies related to the peer-to-peer lending service industry and how the Company is in compliance.
The Company acknowledges that due to the lack of detailed implementation rules as to the peer-to-peer lending service industry in China, and the fact that the PRC government has broad discretion to interpret existing rules and regulations, the Company cannot be certain that its existing practices would not be deemed to violate any existing rules, if amended subsequently, or future rules. The Company is unable to estimate the reasonably possible loss or a range of reasonably possible loss as a result of this uncertainty.
Securities and Exchange Commission
December 7, 2015
Page
For the above reasons, the Company does not believe that it is necessary to make the disclosure as required under ASC 450 for any loss contingencies.
•
Clarify what are the proposed or expected changes in the laws, regulations and governmental policies for your industry and the impact those changes may have on your business.
The Guidelines only set out the basic principles for promoting and administering the online peer-to-peer lending service industry, and new detailed rules and regulations are expected to be adopted by the relevant regulatory agencies, such as the People’s Bank of China, the Ministry of Industry and Information Technology and the China Banking Regulatory Commission, to implement and enforce the principles set out in the Guidelines. As the implementing rules of the Guidelines have not been adopted and published, the Company is uncertain how the principles in the Guidelines will be interpreted and implemented and to which degree the Company’s business practice will be affected by such new rules, laws, regulations and governmental policies.
Securities and Exchange Commission
December 7, 2015
Page
4. You also disclose on page 17 that the PRC regulatory bodies may view the risk reserve fund as a form of guarantee under the Provisions on Several Issues Concerning Laws Applicable to Trials of Private Lending Cases issued by the Supreme People’s Court on August 6, 2015, or the Private Lending Judicial Interpretations, which came into effect on September 1, 2015. And if they did, you may be required to assume the obligations as to the defaulted loan as a guarantor. Please address the following:
•
Tell us why you believe that your risk reserve fund is not considered a “credit enhancement service” or a guarantee of repayment of the loans under the Private Lending Judicial Interpretations when your current policy is to fund the risk reserve account to allow investors to recover their full principal and accrued interest when a loan defaults.
According to the Guidelines, online peer-to-peer lending service providers are prohibited from providing “credit enhancement services.” In light of the requirements outlined by a CBRC officer during the public forum held on the September 27, 2014, the Company believes that “credit enhancement services” is generally perceived in the online peer-to-peer lending service industry to mean providing guarantees to investors in relation to the return of loan principal and interest, which is similar to a guarantee of repayment of the loans under the Private Lending Judicial Interpretations but differs from the Company’s risk reserve fund arrangement in the following aspects:
(i) the purpose of the risk reserve fund is to limit investor losses due to borrower defaults rather than to have any contractual obligation to provide investors with guarantees in relation to the full return of loan principal and interest, and the investors can recover the principal and accrued interest for the defaulted loans only to the extent that the risk reserve fund has not been exhausted as stipulated in the risk reserve fund agreements with investors. Despite the fact that after considering current market dynamics and industry practice, the Company currently implements a risk reserve funding policy that allows invest
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AM2LTR
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
DIRECT DIAL
+852 3740 4863
DIRECT FAX
+852
3910 4863
EMAIL ADDRESS
JULIE.GAO@SKADDEN.COM
PARTNERS
JOHN
ADEBIYI ¿
CHRISTOPHER W. BETTS
WILL H. CAI ^
EDWARD H.P. LAM ¿*
HAIPING LI *
RORY
MCALPINE ¿
CLIVE W. ROUGH ¿
JONATHAN B. STONE *
ALEC P. TRACY *
^ (ALSO ADMITTED IN CALIFORNIA)
¿ (ALSO ADMITTED IN
ENGLAND & WALES)
* (ALSO ADMITTED IN NEW YORK)
REGISTERED
FOREIGN LAWYERS
Z. JULIE GAO
(CALIFORNIA)
BRADLEY A. KLEIN (ILLINOIS)
GREGORY G.H. MIAO (NEW YORK)
ALAN G. SCHIFFMAN (NEW YORK)
42/F, EDINBURGH TOWER, THE LANDMARK
15 QUEEN’S ROAD CENTRAL, HONG KONG
_____
TEL: (852) 3740-4700
FAX: (852)
3740-4727
www.skadden.com
December 7, 2015
AFFILIATE OFFICES
_____
BOSTON
CHICAGO
HOUSTON
LOS ANGELES
NEW YORK
PALO ALTO
WASHINGTON, D.C.
WILMINGTON
_____
BEIJING
BRUSSELS
FRANKFURT
LONDON
MOSCOW
MUNICH
PARIS
SÃO PAULO
SEOUL
SHANGHAI
SINGAPORE
SYDNEY
TOKYO
TORONTO
Dietrich King, Assistant Director
David Lin, Staff Attorney
Amit Pande, Accounting Branch Chief
Benjamin Phippen, Staff Accountant
Division of Corporation
Finance
Securities and Exchange Commission
100 F Street,
N.E.
Washington, D.C. 20549
Re:
Yirendai Ltd.
Registration Statement on Form F-1
Amendment No. 2 to Registration Statement on Form F-1
Filed November 16, 2015 and November 23, 2015
File No. 333-208056
Dear
Mr. King, Mr. Lin, Mr. Pande and Mr. Phippen:
On behalf of our client, Yirendai Ltd., a foreign private issuer
organized under the laws of the Cayman Islands (the “Company”), we submit to the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) this letter setting forth the Company’s responses to
the comments contained in the Staff’s letter dated December 2, 2015. Concurrently with the submission of this letter, the Company is publicly filing amendment no. 2 to its registration statement on Form F-1 (the “Registration
Statement”) and certain exhibits via EDGAR.
To facilitate your review, we have separately delivered to you today five courtesy
copies of the Registration Statement, marked to show changes to the Registration Statement filed with the Commission on November 23, 2015, and five copies of the filed exhibits.
Securities and Exchange Commission
December 7, 2015
Page
2
The Company respectfully advises the Staff that it plans to file another amendment to the
Registration Statement to include the estimated offering size and price range for the offering on December 8, 2015 and commence the marketing process immediately thereafter if the Staff has no objection to this plan, and would greatly
appreciate the Staff’s continuing support and assistance.
With respect to the Staff’s questions and comments relating to the
trust that the Company established a business relationship with recently, the Company respectfully advises the Staff that this relationship is new and evolving, and the Company does not expect this relationship to materially affect the
Company’s business and financial condition in the foreseeable future. The Company currently is not in a position to provide a definitive accounting analysis and conclusion of the trust arrangement due to its new and evolving nature, although
the Company is certain that it does not have any impact on the Company’s historical financials for the periods presented in the Registration Statement. In response to the Staff’s comments, the Company has made its best efforts to answer
factual questions raised by the Staff, as indicated in the responses below. However, the Company would appreciate the Staff’s understanding that the Company is not able to provide a definitive accounting analysis and conclusion at this time,
and the Company will do so in the future when it needs to report financial results for the fourth quarter of 2015.
The Staff’s
comments are repeated below in bold and are followed by the Company’s responses. We have included page references in the Registration Statement where the language addressing a particular comment appears. Capitalized terms used but not otherwise
defined herein have the meanings set forth in the Registration Statement.
Amendment No. 1 to Registration Statement on Form F-1
Our Business, page 1
1.
You state here and throughout the document that you target prime borrowers, comprising credit card holders with salary income. Since the term “prime borrower” may have different meanings by country and
types of lending, please revise to clearly disclose how you define prime borrowers (e.g. does a brand new credit card holder with salary income meet your definition or a person who is significantly past due on their credit card payments, but with
salary income).
In response to the Staff’s comment, the Company has revised its disclosure on pages 1, 82, 117 and
124 of the Registration Statement to clarify that the Company’s targeted prime borrowers comprise credit card holders with stable credit performance and salary income. The Company respectfully advises the Staff that in determining whether a
prospective borrower has stable credit performance and salary income, the Company reviews such borrower’s credit card statement for the last six months and/or credit report from the PBOC for the last five years, as well as the borrower’s
salary for the last six months. If a person is three months or more past due on his or her credit card payments or loan payments, such person would not fall within the scope of the Company’s targeted prime borrowers. On the other hand, if the
credit profile of a brand new credit card holder indicates that the person has stable credit performance and salary income, he or she will be considered as the Company’s targeted prime borrower.
Securities and Exchange Commission
December 7, 2015
Page
3
However, a prospective borrower on the Company’s platform must first meet the definition
of a prime borrower and then meet additional minimum borrower qualification standards for each of the four segments under the Company’s pricing grid, which standards have been disclosed in detail on page 134 of the Registration Statement.
Summary Consolidated Financial and Operating Data, page 11
2.
We note your disclosure on pages 12, 80 and 89 of “transaction fees from borrowers”, “service fees from investors” and the subtotal of these fees and others as “fees earned”. However,
the amounts disclosed are significantly higher than the amounts reported in your Consolidated Statements of Operations for the nine-months ended September 30, 2015. We further note your revenue recognition policy beginning on page F-37. Please
revise the terms “transaction fees from borrowers”, “service fees from investors” and “fees earned” throughout the document and provide detailed disclosure to make it clear to a reader that these amounts are not
equivalent to revenues or any other financial metric that is presented in your financial statements.
The Company
respectfully advises the Staff that the Company believes the terms “transaction fees from borrowers,” “service fees from investors” and “fees earned” reflect the actual status of fees collected by the Company and are
straightforward, intuitive and useful to investors to provide investors with the relevant information as to how the Company charges and collects its fees from borrowers and investors on its platform. In order to avoid any confusion, the Company has
added a footnote on each of pages 12 and 80 of the Registration Statement to clarify that “transaction fees from borrowers,” “service fees from investors” and “fees earned” are not equivalent to revenues or any other
financial metric that is presented in the Company’s financial statements.
Securities and Exchange Commission
December 7, 2015
Page
4
Risk Factors – Risks Related to Our Business, page 14
3.
We note your disclosure on page 15 that the People’s Bank of China together with nine other PRC regulatory agencies jointly issued the Guidelines on Promoting the Healthy Development of Internet Finance. You
state that the Guidelines established the primary regulator and prohibited online-peer-to-peer lending service providers from illegal fund-raising and providing credit enhancement services. However, other statements appear to suggest that additional
laws and regulations may be expected. For example, you state that the Guidelines mentioned above only set out the basic principles and new rules and regulations will be adopted in the future. Please revise your disclosures here and beginning on page
143 to address the following:
•
Clarify what the current laws, regulations and governmental policies related to your industry are and describe how you are in compliance. If you determine that you are currently not in compliance with current
laws, regulations and governmental policies, tell us how you considered the disclosure requirements of ASC 450.
The
Company respectfully advises the Staff that currently the PRC government has not promulgated any specific rules, laws or regulations to specially regulate the peer-to-peer lending service industry. The Guidelines on Promoting the Healthy Development
of Internet Finance jointly issued by the People’s Bank of China together with nine other PRC regulatory agencies in July 2015 (the “Guidelines”), introduced formally for the first time the regulatory framework and basic principles
for administering the peer-to-peer lending service industry in China. The Guidelines was not accompanied by any implementing rules, but rather, the Guidelines urge the relevant regulatory agencies to adopt implementing rules at the appropriate time.
However, there are certain other rules, laws and regulations relevant or applicable to the peer-to-peer lending service industry, including the PRC Contract Law, the General Principles of the Civil Law of the PRC, and related judicial
interpretations promulgated by the Supreme People’s Court. The Company has disclosed brief summary of the Guidelines and such other relevant and applicable PRC rules and regulations in the section “Regulation—Regulations Relating to
Online Peer-to-Peer Lending” beginning on page 143 of the Registration Statement.
Securities and Exchange Commission
December 7, 2015
Page
5
To be compliant with existing rules, laws, regulations and governmental policies relating to
the peer-to-peer lending service industry, the Company has implemented various policies and procedures, including without limitation the following:
(i) the Company acts only as an information intermediary, and does not use its own capital to invest in loans facilitated through its online
marketplace;
(ii) the Company does not commit to provide guarantees to investors under any agreement for the full return of loan principal
and interest;
(iii) the Company does not hold investors’ funds and funds loaned through the Company’s platform are deposited
into and settled by a third-party custody account managed by a qualified bank, China Guangfa Bank;
(iv) the Company has obtained the ICP
license as an internet information provider from the relevant local counterpart of the MIIT in accordance with applicable laws;
(v) the
Company fully discloses all relevant information to investors and borrowers, such as disclosures to borrowers regarding interest rates, payment schedule, transaction fees, and other charges and penalties; and
(vi) the Company has been making strong effort to maintain the security of its platform and the confidentiality of the information provided and
utilized across its platform.
In light of the above, the Company believes that it is in compliance with current rules, laws, regulations
and governmental policies. In response to the Staff’s comment, the Company has revised the disclosure on pages 15 through 17 of the Registration Statement to further clarify the current rules, laws, regulations and governmental policies related
to the peer-to-peer lending service industry and how the Company is in compliance.
The Company acknowledges that due to the lack of
detailed implementation rules as to the peer-to-peer lending service industry in China, and the fact that the PRC government has broad discretion to interpret existing rules and regulations, the Company cannot be certain that its existing practices
would not be deemed to violate any existing rules, if amended subsequently, or future rules. The Company is unable to estimate the reasonably possible loss or a range of reasonably possible loss as a result of this uncertainty.
Securities and Exchange Commission
December 7, 2015
Page
6
For the above reasons, the Company does not believe that it is necessary to make the
disclosure as required under ASC 450 for any loss contingencies.
•
Clarify what are the proposed or expected changes in the laws, regulations and governmental policies for your industry and the impact those changes may have on your business.
The Guidelines only set out the basic principles for promoting and administering the online peer-to-peer lending service industry, and new
detailed rules and regulations are expected to be adopted by the relevant regulatory agencies, such as the People’s Bank of China, the Ministry of Industry and Information Technology and the China Banking Regulatory Commission, to implement and
enforce the principles set out in the Guidelines. As the implementing rules of the Guidelines have not been adopted and published, the Company is uncertain how the principles in the Guidelines will be interpreted and implemented and to which degree
the Company’s business practice will be affected by such new rules, laws, regulations and governmental policies.
Securities and Exchange Commission
December 7, 2015
Page
7
4.
You also disclose on page 17 that the PRC regulatory bodies may view the risk reserve fund as a form of guarantee under the Provisions on Several Issues Concerning Laws Applicable to Trials of Private Lending Cases
issued by the Supreme People’s Court on August 6, 2015, or the Private Lending Judicial Interpretations, which came into effect on September 1, 2015. And if they did, you may be required to assume the obligations as to the defaulted
loan as a guarantor. Please address the following:
•
Tell us why you believe that your risk reserve fund is not considered a “credit enhancement service” or a guarantee of repayment of the loans under the Private Lending Judicial Interpretations when
your current policy is to fund the risk reserve account to allow investors to recover their full principal and accrued interest when a loan defaults.
According to the Guidelines, online peer-to-peer lending service providers are prohibited from providing “credit enhancement
services.” In light of the requirements outlined by a CBRC officer during the public forum held on the September 27, 2014, the Company believes that “credit enhancement services” is generally perceived in the online peer-to-peer
lending service industry to mean providing guarantees to investors in relation to the return of loan principal and interest, which is similar to a guarantee of repayment of the loans under the Private Lending Judicial Interpretations but differs
from the Company’s risk reserve fund arrangement in the following aspects:
(i) the purpose of the risk reserve fund is to limit
investor losses due to borrower defaults rather than to have any contractual obligation to provide investors with guarantees in relation to the full return of loan principal and interest, and the investors can recover the principal and accrued
interest for the defaulted loans only to the extent that the risk reserve fund has not been exhausted as stipulated in the risk reserve fund agreements with investors. Despite the fact that after considering current market dynamics and industry
practice, the Company currently implements a risk reserve funding policy that allows invest