The debt crisis of CITIC Guoan Group is still fermenting.
On May 17, CITIC Guoan Information Industry Co., Ltd. (000839, CITIC Guoan) issued an announcement stating that 97.24% of the company's shares held by the company's controlling shareholder CITIC Guoan Co., Ltd. (hereinafter referred to as Guoan Co., Ltd.) has been frozen by the Shenzhen Intermediate People's Court.
Guoan Co., Ltd. is a wholly-owned subsidiary of CITIC Guoan Group, and Guoan Co., Ltd. holds 36% of CITIC Guoan shares. The largest shareholder of CITIC Guoan Group is China CITIC Group Co., Ltd., a financial central enterprise.
The current financial difficulties encountered by CITIC Guoan Group have attracted widespread attention from the outside world.
Previously, on May 9, CITIC Guoan Group released its 2018 annual report and 2019 first quarter report. According to the financial report, as of March 31, 2019, the group's total assets were 192.892 billion yuan, and the total liabilities were 167.613 billion yuan, with an asset-liability ratio of 86.89%.
Previously, a letter from CITIC Group requested assistance from relevant regulatory authorities regarding CITIC Guoan Group's liquidity risks was circulated on the Internet.
As a company with a assets of 100 billion yuan under a central enterprise, why is CITIC Guoan Group in such a dilemma?
The Supreme People's Court's 2017 judgment has not been implemented yet, and the project involved is still under construction. Photo provided by the surrounding residents
1. After the mixed reform is completed, large-scale mergers and acquisitions began. CITIC Guoan Group is called CITIC Guoan Group Co., Ltd., its predecessor was a national-owned enterprise established on the basis of CITIC Group's full investment in Beijing Guoan Hotel . After the mixed ownership reform in 2014, CITIC Group, the largest shareholder, held 20.945% of the shares.
According to the prospectus for CITIC Guoan Group's bonds, after mixed reform, CITIC Guoan Group is actually in a state of no actual controller, and "there is no relationship or joint action between major shareholders."
Its official website claims that CITIC Guoan Group's business territory involves finance, information network, tourism, resources and energy, large consumption, culture, urban operations, health care, overseas business and other fields. It has 17 first-level subsidiaries, and holds four listed companies, namely CITIC Guoan (000839.SZ), ZhongPu Co., Ltd. (600084.SH), Guoan International (0143.HK), and Silver Nonferrous Metals (601212.SH).
Guotai Junan said in a research report that low-gross profit trading business accounts for a large proportion, which lowers the company's overall profit. CITIC Guoan Group’s three main business segments are resource development and high-tech, tourism real estate and commercial properties, and chemical trade business.
Guotai Junan believes that due to the low gross profit of the trade business, CITIC Guoan Group's profits have been very meager in recent years when its operating income is high. Since 2014, the company's revenue has almost doubled to more than 100 billion yuan, but its net profit has always hovered around 1 billion yuan.
At the same time, radical investment lays the groundwork for future high debt and defaults. After CITIC Guoan Group completed mixed-ownership reform in 2014, it began to engage in large-scale mergers and acquisitions. From 2014 to the end of the third quarter of 2018, the company's total consolidated assets have increased by nearly 100%, reaching 221.5 billion yuan. At the same time, its total liabilities reached 178.297 billion yuan at the end of the third quarter of 2018.
2. All equity of its listed companies is waiting to be frozen
. CITIC Guoan Group currently holds four listed companies, namely CITIC Guoan (000839), Silver Nonferrous Metals (601212), Sino-Portuguese Co., Ltd. (600084) and Hong Kong-listed Guoan International (HK0143).
In the announcement on May 17, CITIC Guoan (000839) stated that after the company inquired with its controlling shareholder Guoan Co., Ltd., Guoan Co., Ltd. has not received any notice or court ruling information related to this waiting freeze, and the reason for the waiting freeze needs further confirmation.
CITIC Guoan (000839) disclosed in the announcement on May 17 that as of the date of this announcement, Guoan Co., Ltd. held 1.428 billion shares, accounting for 36.44% of the total number of shares of the company; the cumulative number of pledged shares of the company it holds was 1.419 billion shares, accounting for 36.21% of the total number of shares of the company; all the shares of the company it holds have been frozen by judicial and waiting for freeze.
CITIC Guoan (000839) said that the company remains independent of Guoan Co., Ltd. and CITIC Guoan Group Co., Ltd. in terms of assets, business, finance, etc. Up to now, the waiting for freeze to the shares held by the above-mentioned controlling shareholder has not had a direct impact on the company's production, operation and control rights. The company will continue to pay attention to the progress and fulfill its information disclosure obligations in a timely manner in accordance with laws and regulations.
All shares listed in the other two A-share companies under CITIC Guoan Group are also waiting to be frozen.
On the evening of May 15 and 16, 2019, listed companies China Portuguese Co., Ltd. (600084) and Baiyin Nonferrous Metals (601212) successively issued announcements stating that the shares of the company held by its controlling shareholder CITIC Guoan Group were waiting to be frozen. Public information shows that all holdings of CITIC Guoan Group in these two listed companies have been frozen by several financial institutions.
The Paper previously reported that on April 26, the third-party credit evaluation agency, Joint Credit, downgraded the main level of CITIC Guoan Group Co., Ltd. from A to BBB, and the rating outlook was negative. This is also the second time that CITIC Guoan's main level was downgraded from AA- to A within one month.
Soon after, CITIC Guoan Group announced that as of April 28, 2019, the company failed to raise full interest payment funds as agreed, and the failure of "15 CITIC Guoan MTN001" to fully repay the interest on time has constituted a substantial default. "15 CITIC Guoan MTN001" is a perpetual bond with a total issuance of 3 billion yuan and a bond interest rate of 6.5%.
3, the first quarter report shows that debt repayment ability has been further weakened
On May 9, 2019, CITIC Guoan Group released its 2018 annual report and 2019 first quarter report. Financial statements show that in the first quarter of 2019, CITIC Guoan Group's debt pressure increased. Both long-term debt repayment ability and short-term debt repayment ability have weakened.
2019 first quarter report shows that as of December 31, 2018, CITIC Guoan Group had a total assets of 198.157 billion yuan, a total liabilities of 170.638 billion yuan, and an asset-liability ratio of 86.11%. As of March 31, 2019, CITIC Guoan Group had a total assets of 192.892 billion yuan, a total liabilities of 167.613 billion yuan, and an asset-liability ratio of 86.89%.
Among the three financial indicators that reflect short-term debt repayment ability, the first quarter report of 2019 showed that the current ratio at the beginning of the period was 1.06, lower than the normal 2:1. The end-of-term current ratio further decreased to only 0.97.
Under the heavy pressure of debt, CITIC Guoan Group's hematopoietic ability is also worrying. According to various consolidated statements, CITIC Guoan Group's operating income in 2018 was 106.484 billion yuan, operating profit was -3.532 billion yuan, total profit was -3.506 billion yuan, and net profit was -4.255 billion yuan.
In the first quarter of 2019, CITIC Guoan Group continued to suffer losses. As of March 31, 2019, the group's operating profit was -781 million yuan, compared with 1.48 yuan in the same period last year. Net profit was -851 million yuan, compared with 105 million yuan in the same period last year.
's latest public financial statements confirm the debt pressure faced by CITIC Guoan Group in previous media reports.
In that widely circulated letter of help sent to the regulatory authorities, CITIC Guoan Group said that as of the end of January 2019, the overall interest-bearing liabilities of Guoan Group were 155.8 billion yuan. Among them, the bank loan balance is 82.4 billion yuan, the bond balance is 16 billion yuan, the securities company loan balance is 3.2 billion yuan, the trust company loan balance is 9.2 billion yuan, the insurance company loan balance is 12.5 billion yuan, the leasing company loan balance is 3.1 billion yuan, and the other loan balance is 29.5 billion yuan.
Guotai Junan believes that CITIC Guoan Group's assets are frequently frozen, the credit limit is almost used up, and there is almost no room for refinancing. Apart from some equity and real estate projects, there are not many assets available for realization on the book assets. Selling assets in the face of huge debts is a drop in the bucket.
4, CITIC Guoan Mansion quagmire
The problem facing CITIC Guoan Group is, how to save itself?
In addition to the previously launched equity sale, another one that has been hoped by CITIC Guoan Group is the CITIC Guoan Mansion project located within the Second Ring Road of Beijing. This project cannot be sold at present due to litigation.
CITIC Guoanfu project disputes took many years.
In 1992, Hong Kong Zhuangsheng Company, controlled by Hunan businessman 1 Zhou Jianhe , formed Beijing Zhuangsheng Real Estate Development Co., Ltd. (hereinafter referred to as Zhuangsheng Real Estate), participated in the renovation of Xuanwumen old city, and won the old renovation project of about 25 hectares on the east side of Xuanwumen Outer Street.
In the next 10 years, the first phase of Zhuangsheng Plaza project and the central office building of Zhuangsheng Plaza were completed outside Xuanwu Gate. In 2001, the second phase of Zhuangsheng project began.
In 2004, due to debt and funding issues, Zhuangsheng's creditor, Hunan Bank of China, seized the A-G plot of Zhuangsheng Phase II.
In 2009, Xinda Investment and Zhuangsheng Real Estate negotiated debt restructuring. In the end, Zhuangsheng Real Estate compensated the land transfer contract of Zhuangsheng Phase II A-G7 plot of land worth 3.259 billion yuan (later reduced to 2.731 billion yuan) to Xinda Investment's subsidiary Xinda Investment. Xinda Investment repays the related debts for Zhuangsheng Real Estate. Zhuangsheng Real Estate can increase its capital and invest 20% of the shares in Xinda Real Estate.
On September 28, 2012, Cinda Investment listed and transferred 100% of the equity of Cinda Real Estate Company. One day later, Zhuangsheng Real Estate, which holds 20% of the equity of Xinda Real Estate, sent a letter to express objection.
In Zhuangsheng Real Estate's view, Cinda Investment tailored the listing conditions for CITIC Guoan Group and set entry thresholds, and finally allowed the latter to obtain a plot of land that had appreciated more than 9 billion yuan at the time with a consideration of 4 billion yuan (including debt rights and demolition fees).
In 2013, Zhuangsheng Real Estate gave Xinda Investment to the defendant's dock, demanding the termination of the contract and the return of the land. In December of the following year, the Beijing Higher People's Court made a first-instance judgment, judging Zhuangsheng Real Estate to lose the case.
During the litigation between Cinda Investment and Zhuangsheng Real Estate, CITIC Guoan had transferred 100% of the equity from Cinda Investment, started to operate the first phase of Guoan Mansion project and successfully sold it, and then prepared the second phase of the project.
Zhuangsheng Real Estate sued the Supreme People's Court again. It was not until March 2017 that the Supreme People's Court final judgment that Zhuangsheng won the case, the agreement was terminated, and the Xinda Investment was ordered to return the land and pay a penalty of 1 billion yuan. Zhuangsheng Real Estate needed to return the contract funds and demolition fees of 2.736 billion yuan.
This makes CITIC Guoan Group difficult. As the winning party, Zhuangsheng Real Estate applied for execution many times to freeze this project, and the CITIC Guoanfu project was in a quagmire.
However, CITIC Guoan Group does not seem to recognize this ending. A reporter from The Paper learned that the land involved in the case has not been returned to the winning party in accordance with the judgment of the Supreme People's Court.
On March 13, 2019, the Third Intermediate People's Court of Beijing issued a "Notice of Assistance for Implementation" to the Beijing Municipal Planning and Natural Resources Commission, requiring the sealing of the right to use the plots involved in the case, with a period of 3 years.
Guotai Junan believes that the huge failure of this real estate investment project and the poor profits of many subsidiaries invested by CITIC Guoan Group all show to a certain extent that the company's lack of ability to review and screen projects and the company's overall internal control system is relatively weak.
