The chief executive is not unused to controversy. The port acquisition caused uproar in Australia at the time given the strategic importance of Darwin to Canberra. And Mr Ye was at the centre of more controversy earlier this year when it was revealed he had hired former trade minister Andrew Robb as a consultant at $73,000 a month.

His assertion linking Darwin Port to One Belt One Road now looks overly ambitious.

A search of documents and company filings in China and Australia by AFR Weekend shows that rather than Landbridge being a cog in Beijing's strategic ambitions at the time it purchased the lease over Darwin's Port, Landbridge was using the acquisition to get in Beijing's good books. All that with a view to accessing cheap funding from state-backed institutions.

"In China it is common to build links with the Party that would then open up preferred funding from the state," says Peter Jennings, executive director of the Australian Strategic Policy Institute.

It is a small but significant distinction, which helps us understand the often opaque workings of China Inc. It should also help dispel the idea that Beijing has a grand strategy for world domination which is then seamlessly executed by state-backed entrepreneurs and government-linked companies.

The documents uncovered by AFR Weekend in China underline the idea that Beijing's strategy is far less organised than is usually thought and is often gamed by opportunistic entrepreneurs like Mr Ye.

It all comes back to credit and how to access it.


For private companies in China this has always been difficult, since state-owned banks favour enterprises linked to the government, leaving other enterprises to compete for funds in more expensive markets.

The port acquisition caused uproar in Australia at the time given the strategic importance of Darwin to Canberra.

In the case of Landbridge this lack of funding looks to have been particularly acute around the time it was preparing to pay $506 million for a 99-year lease over the Darwin Port.

Filings with the Shanghai Clearing House, which regulates bond issues, show Landbridge planned to partially finance the Darwin deal through a 1 billion yuan ($250 million) three-year note in June 2015.

But this deal was cancelled due to "market fluctuations", forcing the company into a series of smaller and shorter-duration issues.

Landbridge raised $300 million once the markets settled down, but it was not the right type of debt.

Mr Ye, a businessman with origins in the provinces, was seeking to push Belt & Road 2000 kilometres south-east to Darwin.

Rather than bonds which matured after three years or even five years, as is standard for longer term infrastructure assets, Landbridge was forced to raise three separate issues with a maturities between one and three years.


To top up its finances it went to China's high-yield shadow banking market, where nose-bleed interest rates are standard.

Disclosures by its main shadow banking lender, the Anxin Trust, show that between July and September 2015 Landbridge borrowed a further 2.85 billion yuan ($570 million) which, in separate disclosures, the company said attracted annual interest rates of between 10 per cent and 12 per cent for 12 month loans.

The combined filings show Landbridge borrowed at least $870 million in the months leading up to its Darwin Port acquisition from the high yield market and local bond market.

Mr Ye was keen to link his Darwin Port acquisition with China's Belt & Road Initiative. Glenn Campbell

While it did secure the finance, the terms were not generous and they left the company facing a funding mismatch, using short-term borrowings to purchase the lease on a long term asset.

To redress the mismatch and the lower risks associated with constantly refinancing its debt, Landbridge turned to the state.

This explains why Ye was so keen to link his Darwin Port acquisition with China's Belt & Road Initiative.

Landbridge confirmed during the week it had held discussions with the Export Import Bank of China (Exim), one of Beijing's two main policy banks which sits under the country's State Council or Cabinet.


The company is known to be seeking a loan of around $500 million, which would go a long way to easing its funding pressures.

Landbridge's financing documents show how, in this instance, the order of events was vastly different to the conventional wisdom. Rather than obtaining cheap funds from a state-backed institution to execute Beijing's larger strategic aims, Ye made the acquisition then sought backing from the state.

Jennings from ASPI says the disclosures illustrate well how government and business interact in China. But they do nothing to diminish concern over a Chinese company with links to the state owning a highly strategic asset such as Darwin Port.

And given the financial risks which now appear to be associated with Landbridge, Jennings questions why the Northern Territory government sold the facility to them in the first place.

"It points to a complete failure on behalf of the Territory to do any due diligence," he says.

"No one asked the basic questions."

A new risk is introduced into the equation. If Landbridge can't secure funding from Exim Bank and it will be at the mercy of China's volatile shadow banking sector and domestic credit markets.

In response to questions from AFR Weekend, Landbridge would not say if the refinancing loan had been approved, saying only that it had "held discussions on funding with various banks including Exim China".


The question around the security of Landbridge's funding is even more acute given its acquisition of the Darwin Port is uneconomic in its current structure.

Documents filed with the corporate regulator in Australia show the holding company for the Port couldn't meet its interest payment in the 2016 financial year and they were deferred by the parent company.

And the gap was not a small one.

Its accounts show Landbridge Infrastructure Australia, the vehicle which owns the Port, generated annualised earnings before interest tax depreciation and amortisation of around $6 million last financial year.

This is well short of annual interest payments of $15 million on its $305 million of debt – it has a further $100 million of debt which is non-interest bearing.

It will therefore need to nearly triple earnings just to make its interest payments, which raises questions about how it will fund the remaining $25 million for upgrading of the Port over the next five years, not to mention the $200 million it has committed to build a luxury hotel on a nearby site.

The vice president of Landbridge Australia Mike Hughes says these will be funded through a combination of debt and equity and stressed port earnings had already started to pick-up and will continue to do so.

"Landbridge recognised that the Darwin Port lease was put out to public tender at a low point in the earnings cycle due to low commodities exports ... among other factors," he says.

"Consequently Landbridge forecast low earnings in 2016 which would improve strongly in 2017 and 2018."

This will need to happen otherwise the local arm of Landbridge will be reliant on funding from a Chinese parent which looks to have many challenges of its own.