China Huarong officially announced that the liquidity crisis of Sunshine City, the parent company of Sunshine City, is expected to ease.
Our reporter Li Beibei reports from Shanghai.
With the support of policies, AMC (Asset Management Company) is accelerating its involvement in the real estate industry and becoming an important force to speed up the clearing of risks.
On August 5, China Huarong Asset Management Co., Ltd. (02799.HK, hereinafter referred to as "China Huarong") published a message on its WeChat account, revealing that recently, China Huarong and Sunshine Longjing Group Co., Ltd. (hereinafter referred to as "Sunshine Group") signed the Framework Agreement on Bailout Restructuring and held a meeting on strategic cooperation in bail-out.
Gao Gan, assistant to the president of China Huarong, said: "China Huarong will give full play to its rich experience in the field of problem enterprise bail-out and non-performing assets revitalization, and help Sunshine Group to bail out the danger and be reborn."
"Help Sunshine Group to bail out the danger"
On August 5th, China Huarong posted a message on WeChat, revealing that in order to implement the relevant requirements of the state on stabilizing the real estate market, ensuring the property and stabilizing people’s livelihood, and further promoting the virtuous circle and healthy development of the real estate industry, China Huarong has comprehensively promoted the bail-out cooperation with relevant market entities. Recently, it has signed the Framework Agreement on Bailout Restructuring with Sunshine Longjing Group Co., Ltd. and held a bail-out strategic cooperation meeting. However, as for the specific content of the framework agreement and the scale of bail-out, the article did not disclose it, and the telephone number announced by China Huarong official website also showed an empty number.
"China Huarong will give full play to its rich experience in the field of problem enterprise bail-out and non-performing assets revitalization business, and help Sunshine Group to bail out the danger and be reborn." On the same day’s strategic cooperation meeting, Gao Gan, assistant to the president of China Huarong, introduced that the rescue of Sunshine Longjing Group was a concrete measure to implement the requirements of the CPC Central Committee and relevant departments on resolving risks in the real estate market.
Lin Tengjiao, Chairman of the Board of Directors of Sunshine Group, said that in the face of liquidity difficulties and debt risks caused by economic downturn and COVID-19 epidemic, Sunshine Group actively carried out self-help, and this cooperation will add more powerful motivation and confidence to the future development of Sunshine Group.
According to public information, Sunshine Longjing Group is a family business jointly held by Lin Tengjiao and his brother Lin Weimin’s wife Wu Jie, among which Lin Tengjiao holds 98% of the shares of Sunshine Longjing Group. Through Sunshine Longjing Group, Lin Tengjiao and Wu Jie have invested in 12 enterprises, among which Wu Jie enjoys about 14.03% of the ultimate beneficial shares of the listed company Sunshine City (000671.SZ) and is the actual controller of Sunshine City; Lin Tengjiao’s ultimate beneficial share is about 13.18%.
In the second half of 2021, Sunshine City began to have a liquidity crisis, and then the company began to actively resolve it.
In order to solve the company’s debt problem, Lin Tengjiao raised funds everywhere, resigned from the director of Industrial Bank, moved nearly 4 billion yuan to subsidize Sunshine City, and cashed in the equity of Wanwuyun worth 3.052 billion yuan. In May this year, he also sold about 15% of his other listed company Longjing Environmental Protection (600388.SH, Fujian Longjing Environmental Protection Co., Ltd.) for 1.734 billion yuan.
As of June 23, the debt situation announced by Sunshine City shows that as of the date of announcement, the total principal amount of the company’s overdue debts (including loans from financial institutions, partners’ money, open market-related products, etc.) is 37.688 billion yuan, of which: in the open market, the unpaid principal and interest of overseas open market bonds totaled 165 million US dollars, and the unpaid principal and interest of domestic open market bonds totaled 13.391 billion yuan. In April this year, the central bank called a number of banks and five national asset management institutions (AMC) to hold a meeting to discuss the rescue of real estate enterprises in danger. Sunshine City was among the 12 real estate enterprises that were rescued at that time.
As of press time, the reporter of China Times failed to obtain detailed information about the above agreement from Sunshine Longjing Group (Sunshine Holdings) and Sunshine City Group. However, before that, on July 19th, Sunshine City Group emphasized to the reporter of China Times that Sunshine City is actively promoting the resumption of production of projects in various places. In 2022, the company will no longer aim at sales, but establish "ensuring delivery and production" as the most important task of the year.
At present, Sunshine City has set up a "10W+ Delivery Special Working Group" to implement a "one plan, one policy" for projects with risky delivery, and make overall arrangements for funds to ensure the payment of important and difficult projects with fast progress, great risks and wide influence; At the same time, communicate with suppliers, creditors and project partners to avoid passive shutdown of the project; For major and difficult projects that have fallen into passive shutdown, we will mobilize superior resources to support them and strive for the resumption of work and production.
Stimulated by the good news of China Huarong’s official bail-out, on August 5, Sunshine City closed at HK$ 2.05 per share, up 3.02%.
AMC stepped up admission
Official website showed that China Huarong was established on November 1, 1999. It is one of the four state-owned financial asset management companies established in response to the Asian financial crisis, defusing financial risks, and promoting the reform of state-owned banks and extricating state-owned enterprises from difficulties. It was listed on the main board of the Hong Kong Stock Exchange at the end of October 2015. The company’s main businesses include non-performing assets management, financial services business, and asset management and investment business, among which non-performing assets management is the core business of China Huarong.
According to public information, China Huarong has given a lot of support to real estate enterprises in danger during the year: before reaching a strategic cooperation with Sunshine City, China Huarong participated in the debt restructuring of Fantasia, and its Jiangsu branch signed a strategic cooperation agreement with Zhongnan Construction (000961.SZ) in May this year to support the company’s transformation and development; On August 2, China Huarong Beijing Branch reached a settlement with Xinhualian (000620.SZ) and its subsidiaries on two restructuring debts totaling 1.274 billion yuan.
In fact, since the end of 2021, regulators including China Banking and Insurance Regulatory Commission, the Central Bank, and the State-owned Assets Supervision and Administration Commission have voiced their support and encouraged AMC to resolve real estate financial risks by directly purchasing bank claims of housing enterprises in difficulty. In January 2022, the financial management department convened a meeting of several financial AMCs to study AMC’s participation in asset disposal, project mergers and acquisitions and related financial intermediary services of venture real estate enterprises in accordance with the principles of marketization and rule of law.
Encouraged by the policy, AMC, including China Huarong, is accelerating its entry into the ranks of housing enterprises.
According to the statistics of Kerry Real Estate Research Center, under the guidance of policies, China Cinda, China Huarong and Great Wall Assets have participated in the rescue of housing enterprises. "As a professional non-performing asset disposal institution, AMC’s entry is obviously beneficial to asset revitalization, liquidity improvement and debt risk resolution in the real estate industry. At the same time, the increase in the demand for disposal of non-performing assets has also brought more business opportunities to AMC. " Kerry Real Estate Research Center pointed out.
For example, on March 14 this year, Great Wall Assets, one of the four national AMCs, issued 10 billion yuan of financial bonds for real estate financial risk resolution; In April, Great Wall Assets signed a strategic cooperation agreement with China Communications Group. The two sides will cooperate in the fields of state-owned enterprise reform and restructuring, real estate industry risk resolution, "two non-two-capital" divestiture and disposal, and non-performing assets revitalization.
Kerry Real Estate Research Center emphasizes that in addition to national AMC, local AMCs will also accelerate their entry. For example, on July 19th, Zhengzhou Real Estate Group and Henan Assets jointly established Zhengzhou Real Estate Relief Fund, which participated in the relief work such as revitalizing the problem real estate and rescuing the housing enterprises in difficulty through asset disposal, resource integration and restructuring of consultants.
However, it is worth noting that some insiders pointed out that because many of their businesses are related to real estate, some AMC’s real estate risk exposure is not small. For example, in the 2021 annual report, China Huarong revealed that "the Group mainly conducts special opportunity investment business based on non-performing assets through subsidiaries such as Huarong Rongde. In 2021, Huarong Rongde’s net loss was RMB 661.6 million, mainly due to the deterioration of the operation and financial situation of some real estate enterprises’ customers and the decline of their performance ability. Huarong Rongde confirmed a large credit impairment loss in the current period. "
In the research report, Kerui Real Estate Research Center also pointed out that the cooperation process with AMC is still slow due to the uneven assets of real estate enterprises in danger and the complicated debt and creditor’s rights problems, and most of them remain in the agreement stage: "On the whole, the effect of the ‘AMC+ real estate enterprises in danger’ model remains to be further seen. In the period of exploring the way out, the industry still has to give priority to self-help, and survive the difficult period by means of debt extension, asset sale and other conventional means. "
Bai Wen Xi, chief economist of IPG China, bluntly told the reporter of China Times that the premise for AMC to give full play to the advantage of "disposing and sorting out non-performing assets" is to obtain the asset management right of the real estate enterprises in danger. "AMC can only become a supporting role and resource provider for these real estate enterprises to save themselves, but can’t become the leader of asset disposal, which naturally extends the actual effective period after AMC’s appearance." Bai Wenxi said.
Editor in Charge: Zhang Bei Editor in Chief: Zhang Yuning