has been frozen frequently and defaulted several times... CITIC Guoan , a large group with hundreds of billions of assets and a great background, is now hanging on by a thread and struggling to survive.
's "adopted son" was in trouble, and CITIC Group, as the largest shareholder, unsurprisingly began to rescue him and provided entrusted loans of up to 3.75 billion yuan. What's more, this "mother" plans to reorganize and "save her son".
At this point, assistance still makes sense. Unexpectedly, in March 2019, CITIC Group issued a letter openly requesting the China Banking and Insurance Regulatory Commission to coordinate with the Supreme Court to file a retrial of the Guoan Mansion project as soon as possible and promote the resolution of the Guoan Mansion land case that had already been finalized.
CITIC Group did not hesitate to bear the infamy of distorting market rules and brazenly turned into a white knight holding a staff and dancing around, just to save the "prodigal son".
but CITIC Guoan can be "safe"? Where to go from this crisis? The market will wait and see.
CITIC Guoan logo
CITIC Guoan Group official website shows that CITIC Guoan Group has 17 first-level subsidiaries , holding CITIC Guoan (000839.SZ), Sino-Portuguese Shares (600084.SH), Guoan International ( 0143.HK) and Baiyin Nonferrous Metals (601212.SH) , 44 listed companies, are large comprehensive enterprise groups with assets exceeding 100 billion.
CITIC Guoan Group official website business layout introduction
According to the 2019 semi-annual report released by CITIC Guoan Group, as of June 30, 2019, the group's total assets were 184.491 billion yuan, total liabilities were 160.66 billion yuan, and the asset-liability ratio reached 87.08 %.
Guoan Group’s liabilities and debt ratio this year at a glance
However, anyone who is slightly sensitive to domestic finance knows that due to frequent debt defaults and asset seizures, CITIC Guoan Group is now besieged on all sides.
A casual search will reveal the following "embarrassments":
On March 15, 2019, CITIC Guoan Group failed to pay 2.5 billion in interest for the first quarter of 2019 under its insurance debt investment plan 39.45 million . Bank of Beijing was Forced to fulfill guarantee obligations.
On April 28, 2019, the Shanghai Clearing House announced that April 28, 2019 is the interest payment date of 15 CITIC Guoan MTN001. As of the end of the day, the Shanghai Clearinghouse still had not received the interest payment funds from CITIC Guoan Group, and was temporarily unable to act on behalf of the issuer to pay interest on this bond. It is understood that the issuance scale of 15 CITIC Guoan MTN001 is 3 billion yuan, the term is 5+N years, and the amount of interest payable is 195 million yuan.
A large conglomerate with assets close to 200 billion and the golden name "CITIC" in its business name cannot even pay tens of millions in interest, which undoubtedly shocked the market.
And the real situation is even more shocking.
Since the beginning of 2019, CITIC Guoan Group’s assets have been frequently frozen, and many bonds have defaulted. Since April 2019, CITIC Guoan Group has defaulted on 7 medium-term notes, involving a total principal of 13.4 billion yuan.
In addition, CITIC Guoan Group’s equity holdings in listed companies CITIC Guoan (000839.SZ), Baiyin Nonferrous Metals (601212.SH), and Sino-Portuguese Shares (600084.SH) are almost all pledged or frozen. On March 19, 2019, there were 9 new judicial freezes between March 19 and April 12, 2019.
Third-party assessment agency Lianhe Credit also lowered the main credit rating of CITIC Guoan Group twice within a month, first from AA+ to AA-, and then from AA- to A, with a negative rating outlook.
On May 8, 2020, CITIC Guoan’s daily K-line chart
From the perspective of debt maturity, CITIC Guoan Group should have outstanding 3 billion yuan in 2018, 73.2 billion yuan due in 2019, and 363 yuan due in 2020. billion, with 43.3 billion yuan due in 2021 and beyond.
This means that CITIC Guoan Group will be under great pressure to repay debts in the future, and continuous defaults may be its normal state.
CITIC Guoan Group said that the company is actively raising funds through various channels, strengthening its own operations, and striving to ensure the maturity repayment of subsequent debt financing instruments.
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Judging from the company's trade name, we can know that CITIC Guoan Group has a great background.This company was formerly known as Beijing Guoan Hotel , which was invested and established by China International Trust and Investment Corporation in April 1987. Later, it continued to expand in the financial field, network information, resources and energy and other fields, and became an important subsidiary of CITIC Group's mainland business sector.
In 2014, after a highly publicized and controversial mixed-ownership reform, CITIC Guoan was transformed from 100% state-owned by CITIC Group into an enterprise with the majority of private shareholders.
CITIC Guoan Equity Change Chart Source: Yema Finance
Current shareholders of CITIC Guoan Group include CITIC Group (20.94%), Heilongjiang Dingshang Investment Management Co., Ltd. (19.76%), and Beijing Heshengyuan Investment Management Co., Ltd. (17.79% ), Ruiyu (Shanghai) Equity Investment Fund Partnership (15.81%), Gonghe Holdings Co., Ltd. (15.81%), Tianjin Wanshun Real Estate Co., Ltd. (9.88%).
After the shareholder structure of several private shareholders including Dingshang Investment and Heshengyuan Investment was penetrated, most of them are natural persons. In 2014, these mysterious natural person shareholders entered the company at a price lower than the net assets, which aroused widespread public attention. Questions about the "discount sale" of state-owned assets continued to be raised in the market.
On August 11, 2014, China Securities Network reported that "Mixed reform was accused of selling state-owned assets at a low price."
After completing the mixed reform, CITIC Guoan Group made rapid progress and its assets expanded rapidly. In 2013 before the mixed-ownership reform, the consolidated assets of CITIC Guoan Group were 94.9 billion. As of the third quarter of 2018, the consolidated assets of CITIC Guoan had grown rapidly to 221.5 billion. The business scope involves finance, information networks, tourism, resources and energy. , large consumption, culture, urban operations, health care, overseas business and other fields.
Although the asset size of CITIC Guoan Group has expanded rapidly, its return on assets has been deteriorating. In the first three quarters of 2016, 2017 and 2018, CITIC Guoan Group achieved operating income of 101.021 billion yuan, 103.962 billion yuan and 72.947 billion yuan, while the net profits in the same period were only 1.384 billion yuan, 692 million yuan and 56 million yuan respectively. Showing a downward trend year by year. From 2015 to 2017, the return on net assets of CITIC Guoan Group were 2.77%, 3.77% and 1.87% respectively, and the company's overall profitability became weaker and weaker.
CITIC Guoan Group’s various business income and gross profit margins in recent years (unit: 100 million yuan, %)
CITIC Guoan Group’s real estate projects under construction as of the end of March 2018 Source: The Paper
The reasons behind this are different, and must be complete The analysis may take a lot of ink, but with the adjustment of China's economic structure, some businesses that were originally profitable are no longer glamorous. CITIC Guoan Group's information network, resources and energy and other business sectors have performed sluggishly, and their overall return on assets has also declined. Not surprising.
And CITIC Guoan Group has the golden name of CITIC and still enjoys many conveniences in financing. Therefore, it can quickly expand its asset size through highly leveraged debt expansion. The diversified investment projects have not brought about the enhancement of profitability. , but brought about soaring financial costs.
Among them, in the first three quarters of 2018, CITIC Guoan Group’s financial expenses were 4.05 billion yuan, a year-on-year increase of nearly 40%, and the net profit dropped by 89% year-on-year, resulting in a major operating loss for the company in the 2018 fiscal year. The net profit was A loss of 4.255 billion yuan.
Against this background, it is not surprising that the debt crisis broke out in 2019.
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In order to survive, CITIC Guoan conducted a series of asset disposals. In 2018, Menggu Power, a subsidiary of CITIC Guoan , was transferred to Rongsheng Holdings for 2.172 billion yuan, and 31.80% of the shares were also transferred.
CITIC Guoan Group announced debt crisis
At the same time, CITIC Guoan also began to sell off Qinghai Salt Lake project, Sanya Coconut Beach Hotel, Hainan Wanning Real Estate Project, Jinglong Building and other assets to raise funds to alleviate the debt crisis.
However, the sale of these assets did not prevent a series of debt defaults. As more assets were seized, the debt crisis of CITIC Guoan Group became more and more intense. At this time, there were thousands of threads between CITIC Group and CITIC Guoan Group. The inextricable connection is constantly questioned by people, and people are constantly looking forward to it.
In times of crisis, will CITIC Group be the white knight who comes to help?
In fact, CITIC Group did take action.
April 28, 2019 The Paper reported that CITIC Guoan’s self-rescue operation
After falling into a liquidity crisis, CITIC Guoan Group received assistance from its largest shareholder, CITIC Group. In September 2018, CITIC Group provided an entrusted loan of RMB 43.5 billion to CITIC Guoan Group as emergency liquidity support. In January 2019, CITIC Group once again provided an entrusted loan of 4.25 billion yuan to CITIC Guoan Group, specifically for Guoan Group to pay arrears of wages to migrant workers. However, this seems to be a drop in the bucket.
In early March 2019, media reports stated that CITIC Group had established a working group to reorganize CITIC Guoan Group. Chang Zhenming, then chairman of CITIC Group, said regarding the debt restructuring of CITIC Guoan Group, CITIC Guoan Group had hired CITIC Securities as a debt restructuring consultant, and the CITIC Securities team was working on its financial debt restructuring, hoping that the debt restructuring would be able to Goes smoothly.
CITIC Guoan Group's annual report also shows that CITIC Securities Company has been hired as a financial consultant to comprehensively sort out the various assets and debts of Guoan Group, and actively carry out related asset disposal work to solve the problem of financial constraints.
On April 17, 2019, Times Weekly reported that it had obtained a document titled "Letter on Requesting the China Banking and Insurance Regulatory Commission to coordinate and resolve issues related to the reorganization of CITIC Guoan Group Co., Ltd." .
Part of the "Letter Requesting the China Banking and Insurance Regulatory Commission to Coordinate and Solve Relevant Issues in the Reorganization Process of CITIC Guoan Group Co., Ltd."
This letter was sent by CITIC Group to the China Banking and Insurance Regulatory Commission, to the effect that it requested the China Banking and Insurance Regulatory Commission to intervene, stabilize and coordinate Relevant creditors, especially coordinating financial institutions to cut off loans and prosecute and seize , CITIC Guoan, , help create a better public opinion environment and coordinate the resolution of judicial litigation issues.
Among the creditors of CITIC Guoan , the top five financial institutions in terms of loan balance include Industrial and Commercial Bank of China 29.9 billion, China Construction Bank , Agricultural Bank of China 6.6 billion, China Development Bank 6.4 billion, and Bank of Beijing 4.9 billion.
What is even more surprising is that in this official letter, CITIC Group openly requested the China Banking and Insurance Regulatory Commission to coordinate with the Supreme Court to re-examine the National Security Bureau project as soon as possible and promote the resolution of the litigation issues of the National Security Bureau project. The Guoanfu project originated from a protracted dispute over a prime piece of land near Xuanwumen, Beijing. In 2017, the Supreme Court made a final judgment requiring that the land development rights be returned to the original land owner, Beijing Zhuangsheng Company. However, the Supreme Court’s decision The judgment has yet to be implemented. In view of the expected huge benefits from the development of this land, it is crucial to resolve the dilemma of CITIC Guoan . Therefore, CITIC Guoan is fighting against the execution of the judgment while promoting a retrial.
According to media reports such as The Paper and Caixin, the Supreme Court will re-examine the litigation regarding the National Security Administration project.
I don’t know if it was the official letter from CITIC Group that played a role. Two and a half years after the final verdict, the Supreme Court decided to re-examine the case, which shocked the legal community. Uproar.
Based on historical origins and brand sharing, when CITIC Guoan Group is facing difficulties, it is understandable that CITIC Group, as the major shareholder, takes a more active rescue stance. However, many of CITIC Group’s practices are highly questionable, both in terms of market rules and corporate governance.
From the perspective of market rules, CITIC Group is suspected of using its status as a central enterprise to openly try to influence regulatory agencies and judicial agencies. This obviously affects market fairness and justice, and also affects the reputation of judicial agencies.
In fact, with the decline in economic growth, many enterprise groups have experienced thunderstorms in the past year or two, and many of them have strong backers. For example, the recent thunderstorms , Peking University Founder Group, , are backed by Peking University and the Ministry of Education, If everyone, like CITIC Group, publicly issued official letters to advocate for the interests of affiliated companies, to what extent would market rules be distorted?
From the perspective of corporate governance, although CITIC Group is the major shareholder of CITIC Guoan Group, the two are completely independent market entities after all, and there is only limited overlap in shareholder structure and interest subjects. Judging from the current shareholding ratio of CITIC Group in CITIC Guoan , the latter is not a subsidiary of the former, and the latter cannot be consolidated in the financial statements. CITIC Group is a general equity investor. CITIC Group can provide reasonable assistance to the companies it invests in, but it needs to be made clear that such assistance must be based on market transactions at fair prices, and cannot be improper related transactions, let alone the transfer of benefits from private parties!
CITIC Group is a wholly state-owned company, CITIC Guoan Group is a mixed-ownership company dominated by private equity. How to prevent the loss of state-owned assets in related transactions is a due responsibility, and at the same time, taking into account the mixed ownership reform process of CITIC Guoan Group Public opinion has questioned that CITIC Group’s rescue measures should avoid the suspicion of being under the guidance of others, and should not be used by others.
In 2013, the mixed-ownership reform plan for state-owned enterprises, which was determined at the Third Plenary Session of the 18th CPC Central Committee and emphasized in the report of the 19th CPC National Congress, aims to develop cross-shareholding and mutual integration of state-owned capital, collective capital, non-public capital, etc. A mixed-ownership economy is conducive to the various forms of ownership capital complementing each other's strengths, mutual promotion, and common development, and improving corporate governance capabilities. The purpose is to make enterprises of all forms of ownership win-win, rather than using the status of central enterprises to interfere with market rules, or to operate after mixed ownership reform. Unscrupulous companies cannot keep their secrets, let alone convey benefits in disguised form, or condone moral hazard.
On March 29, 2019, CITIC Group Chairman Chang Zhenming answered a Caixin reporter’s question
At the CITIC Group performance conference on March 29, 2019, investors were worried about whether CITIC Guoan Group would face bankruptcy liquidation. , Chang Zhenming, chairman of CITIC Group, asked reporters at the press conference: "Which company in China has gone bankrupt and liquidated?"
Chang Zhenming's rhetorical question was somewhat confusing and even jaw-dropping. Obviously, there are countless companies that have gone bankrupt and liquidated in China. For many companies with poor management, bankruptcy and liquidation is not necessarily a bad thing. However, based on scenario speculation, Chairman Chang probably firmly believes that CITIC Guoan Group will not go bankrupt and liquidate. If it wants to avoid bankruptcy, CITIC Group, with total assets of more than 7 trillion, will certainly have the confidence to protect itself. But does this run counter to the original intention of the mixed reform?
In the official letter mentioned above, CITIC Group stated that it will fully cooperate with CITIC Guoan Group to respond to liquidity risks and asset restructuring. As a general statement, it may be blameless, but if CITIC Group relies on its own strength and influence to become a white knight who behaves perversely and dances with a stick, it will make the market and the public stunned.
Not long ago, Chang Zhenming, who had been at the helm of CITIC Group for nearly 10 years, resigned, and Zhu Hexin, deputy governor of the central bank, took over. What changes will be made to CITIC Group's corporate strategy? Will the debt-ridden CITIC Guoan Group face changes? The market is waiting to see.
