Liu Wei/from Beijing
The financing channels for central enterprises are always open.
html On August 11, the fixed income information platform of the Shenzhen Stock Exchange showed that China Resources Land Holdings Co., Ltd. (hereinafter referred to as " China Resources Land ", 01109.HK) has submitted for registration for its 2022 public issuance of corporate bonds to professional investors (second time) .It is reported that this bond is a small public offering with a planned issuance amount of 10 billion yuan. It is intended to be used to support real estate companies in the industry to alleviate liquidity pressure (including but not limited to replacement of early investment funds and subsequent asset investment and acquisitions, etc.), repayment Interest-bearing debt, project construction and replenishing working capital.
A small public offering bond with the same amount was issued as early as March 17 this year. The acceptance date at that time was February 28, and it was approved in only about half a month.
At the beginning of 2022, as the number of real estate companies continues to increase, mergers and acquisitions by state-owned enterprises and central enterprises have high hopes from all parties as a way to solve this problem. However, so far, the wave of mergers and acquisitions has not yet arrived. Recently, in order to solve the problems of in-risk real estate companies, there has been frequent news that the government has teamed up with local AMCs to set up a real estate bailout fund.
A person close to China Resources Land told reporters: "This year many companies expect central and state-owned enterprises to participate in mergers and acquisitions, but in fact few cases have been implemented. The difficulty in mergers and acquisitions in the current market is that most real estate companies are in danger There are too many asset problems, and many of them have no acquisition value, so central and state-owned enterprises cannot risk entering the market."
He believes that the current problem is not that there is no funds, but that there are no high-quality assets. If it is carried out in a market-oriented manner, it will be difficult. Really help companies get out of trouble.
"The core problems of current mergers and acquisitions are: first, the lack of access to assets after consumers lose confidence in the market; second, the depletion of project cash flow leads to stagnant operations. In addition to funds, it is often necessary to ensure the creation of projects. "Legal environment." Bai Yu, founder and CEO of Thinkool, believes.
Holds tens of billions of M&A loans
In January 2022, the first M&A loan in the real estate industry was launched. China Resources Land was approved to receive a China Merchants Bank 20 billion M&A financing line, dedicated to M&A business. At that time, issues such as how the M&A loan will be used, how it will be implemented in the future, and this year’s investment standards were also of concern to the outside world.
"We have announced that the M&A loan quota is 20 billion yuan, but so far, the approved M&A loan reserve has actually reached 40 billion (yuan)." At the 2021 annual results conference held on March 31 On the Internet, China Resources Land Chief Financial Officer Guo Shiqing said that once the project matures, China Resources Land’s M&A loans can be activated at any time.
Talking about M&A standards, Xie Ji, chief strategy officer of China Resources Land, said that China Resources Land’s attitude toward M&A is both positive and cautious. “At present, we focus on project-side M&A and do not consider M&A of companies or platforms. Regarding acquisitions, M&A projects and auctions For any land listed, we will compare the risks and returns, and make mergers and acquisitions after considering multiple factors.”
It is reported that whether it is a secondary market bidding or acquisition, China Resources Land’s internal requirement for project return is to control the after-tax profit. The rate is about 12%.
In terms of financial advantages, China Resources Land can dominate the entire industry. As of the end of 2021, China Resources Land's three red lines are all green, with a cash-to-short-term debt ratio of 1.99 times, a net debt ratio of 30.4%, and an asset-liability ratio of 60.37% after excluding contract liabilities. At the same time, capital costs remained at a low level in the industry, with the weighted average financing cost at the end of the period being approximately 3.71%, a year-on-year decrease of 37 basis points.
However, the downward trend in the industry is something that every company must avoid. As of June 30, 2022, China Resources Land's cumulative contracted sales reached 121.04 billion yuan, a year-on-year decrease of 26.6%; the total contracted sales construction area was approximately 5,871,680 square meters, a year-on-year decrease of 39%.
In addition to China Resources Land, other companies such as Poly Development also received M&A loan quotas, but few actually took action.Financial commentator Tan Haojun believes that on the one hand, the State-owned Assets Supervision and Administration Commission requires central enterprises to withdraw from general competitive industries as much as possible, and the real estate industry is one of them; on the other hand, there are not many central enterprises with the ability to acquire M&A, and some very Central enterprises that are mainly engaged in real estate business will not participate in mergers and acquisitions. Therefore, central enterprises and state-owned enterprises will be subject to considerable constraints when participating in mergers and acquisitions.
An industry insider said in an interview that generally speaking, the cycle of mergers and acquisitions will be relatively long. This is an objective reality. In addition, with the market downturn, it is now difficult to say that a certain company's financial situation is particularly good. In addition, mergers and acquisitions themselves require a very high degree of professionalism, and careless operations may lead to high costs. This is why companies hold a large number of mergers and acquisitions loans. The important reason for not taking action yet.
The mergers and acquisitions market has not made much progress, but China Resources Land has made considerable gains in the bidding, auction and listing market. In the context of generally sluggish willingness of real estate companies to acquire land, China Resources Land ranked first with an equity land acquisition amount of 47.9 billion yuan.
The bailout of real estate companies has entered a critical stage
Since the second half of 2021, with the adjustment of industry policies, many real estate companies have fallen into a state of emergency in the capital chain, and there is no delay in waiting for relief.
On December 20, 2021, the Central Bank and China Banking and Insurance Regulatory Commission issued the "Notice on Providing M&A Financial Services for Risk Disposal Projects of Key Real Estate Enterprises" to encourage banks to carry out mergers and acquisitions loan business in a steady and orderly manner, and focus on supporting high-quality real estate enterprises in mergers and acquisitions. and high-quality projects for large real estate companies in difficulty. At the same time, we will increase support for bond financing, support high-quality real estate companies in registering and issuing debt financing instruments in the inter-bank market, and raise funds for mergers and acquisitions of key real estate company risk disposal projects.
It is against this background that real estate companies such as China Resources Land have successively obtained tens of billions of merger and acquisition loans.
In March 2022, Wang Liang, executive vice president, financial director and secretary of the board of directors of China Merchants Bank, said that actively supporting high-quality real estate companies to expand mergers and acquisitions and helping some real estate companies with risks or very difficult liquidity to achieve asset restructuring is an important way to jointly safeguard real estate. The healthy and stable development of the market.
However, market analysts said that on the one hand, the industry is in a downward cycle, future expectations are unclear, and mergers and acquisitions transactions are complex. In contrast, land acquisition through bidding, auction, and listing is easier to operate from both a financial and operational perspective.
On the other hand, insurance companies are unwilling to touch core high-quality assets prematurely. The combination has caused many real estate companies with plans to acquire to still adopt a wait-and-see attitude.
As the M&A bailout failed to materialize, new solutions were gradually implemented. On August 11, Zhongnan Construction’s controlling shareholder Zhongnan Holding Group signed a cooperation framework agreement with the local AMC Jiangsu Asset Management Co., Ltd.; on July 19, Zhengzhou Real Estate Group Co., Ltd. and Henan Asset jointly established the Zhengzhou Real Estate Relief Fund , through asset disposal, resource integration, restructuring consulting, etc., participating in the revitalization of problematic properties and the rescue of difficult real estate companies and other relief efforts.
Bai Yu believes that due to the large scale and complex situation of the real estate companies in danger, it is necessary to take comprehensive measures and a multi-pronged approach. Whether it is mergers and acquisitions of state-owned real estate companies or AMC distress relief funds, they have their own advantages and entry points. The participation of state-owned enterprises is of great help in restoring the confidence of project owners, maintaining asset values, and revitalizing operations. AMC is better at legal consolidation, debt restructuring, asset liquidation, etc. It should be said that each has its own emphasis.
"The M&A loans of China Resources Land and others are based on projects, which is in line with the government's tone. Compared with the AMC bailout fund, each has its own advantages." Bai Yu said.
Tan Haojun said, "Central-owned enterprises cannot intervene on a large scale to bail out real estate companies. Now it is not a bad idea to rely on local governments and local asset management companies to solve the problem. At present, in addition to the five major national asset management companies, local asset management companies There are nearly 60 local asset management companies. After they engage in some banking business, they will also face the challenge of business expansion. If they find a combination that is acceptable to both parties, there is still a lot of room for cooperation with real estate companies in the future. "
