On February 8, Oriental Assets announced the signing of a strategic cooperation agreement with Xuhui Group, which will help Xuhui dispose of assets, revitalize assets, merge and reorganize projects, and provide financial support. Although the details of the cooperation have not been disclosed, the industry speculates that Oriental Assets may introduce state-owned assets for Xuhui, or directly take over the equity of Xuhui Yongsheng Property or assist in its sale.
Why help Xuhui? However, at the end of 2022, the failure of its projects to repay some non-standard debts caused market panic.
In response, Xuhui said that it was caused by the request of the project shareholder trustee for early liquidation. There are two shareholders behind the project, one is Daye Trust under Oriental Assets, and the other is Ping An Real Estate.
Since then, Xuhui's cash flow has deteriorated rapidly, and on November 1, 2022, it announced the suspension of payment of all principal and interest payable under overseas financing arrangements. Xuhui, a hundred billion real estate company, officially exploded. It is very likely that
Oriental Assets will cooperate with Xuhui on the basis of previous creditor's rights and debts. Although the specific way of cooperation with Xuhui is not yet known. But we can also get a glimpse of it from its past cases. There are three well-known ways
for Dongfang Assets to relieve real estate enterprises:
one is similar to Rongchuang Taohuayuan Project, where Dongfang Assets provides 33% of the total scale.
Dongfang Assets directly purchases the bonds it has issued. 17. Guancheng Datong uses 95% equity of Beijing Taiyanggong Real Estate Development Co., Ltd. as a high-quality asset. 17.
The third is to introduce agent construction for risk projects, such as the previous cooperation with Greentown Management.
The industry speculates that perhaps Oriental Assets will use its own resource advantages and endorsement to introduce a powerful third party to Xuhui, or directly acquire the equity of Xuhui Yongsheng Property and help it sell.
Four AMCs to relieve real estate enterprises Accelerate
the work of the four AMCs in 2023 will focus on three aspects: implementing the No.62 culture of China Banking and Insurance Regulatory Commission to relieve the risks of small and medium-sized financial institutions; implementing the No.19 document of the State Council to revitalize state-owned assets; and relieving the real estate industry to "ensure the delivery of buildings, the people's livelihood and stability".
In terms of real estate relief, the four major AMCs have accelerated significantly since the beginning of the year. Among them, the value of real estate projects invested by China Xinda in the form of "cash investment + creditor's rights + agent construction" has exceeded 50 billion yuan. The accelerated landing of
relief housing enterprises is closely related to the risk assets of the four AMCs themselves: by the end of June 2022, 46% of the balance of non-performing assets acquired and restructured by Huarong was related to the real estate industry, and the related exposure was twice the company's net assets; At the end of June 2022, 44% of the balance of non-performing assets purchased and restructured by Xinda was related to the real estate industry, and the related exposure was 30% of the company's net assets.
In terms of amount, the housing exposure of Oriental Assets is about 150 billion, ranking first among the four major AMCs. Therefore, the relief of real estate is "killing two birds with one stone" for the four AMCs.
By the end of October 2022, 29 risk mitigation projects had been implemented by Oriental Assets, with an investment of 13.75 billion yuan, which promoted the delivery of 19800 real estate units on schedule
. On November 1,
2022, Xuhui Holding Group announced that it had suspended the payment of all principal and interest payable under the company's overseas financing arrangements. As of October 31, the total amount of offshore debt of CIFI (including bank loans, senior notes and convertible bonds) was approximately US $6.85 billion; the total amount of principal and interest of the suspended payment (due but unpaid) was approximately 4.
According to the previous announcement of CIFI, there was no public debt due during the year. Among the domestic and foreign bonds, the latest one is the US dollar bond due on January 23, 2023, with 2 left. With one RMB foreign bond and three domestic bonds that need to be exercised, the overall size of Xuhui's public bonds that need to be repaid next year is only 8 billion RMB. Compared with Xuhui's sales scale, the debt pressure next year is not great.
However, the announcement said that 4. Subsequently, rating agencies, including S & P and Fitch, downgraded Xuhui's credit rating one after another, triggering the constraints of overseas syndicated loans and requiring early repayment.
Xuhui announced that
it had hired Haitong International Securities Co., Ltd. as a financial adviser and Nianlida Law Firm as a legal adviser to assist the company in conducting transparent dialogue with overseas creditors. Explore all feasible options with the company and overseas creditors to seek a comprehensive solution to the existing difficulties.
In order to alleviate the liquidity pressure and provide funds for business operations, the Company is actively exploring opportunities to dispose of overseas assets with a view to creating liquidity or deleveraging.
Why is it a pity for Xuhui? On September 28, 2022, Xuhui's stock and debt plummeted because a project equity trust financing product in Tianjin could not be paid on time and was pursued by Daye Trust. In this case
, Xuhui tried to calm the market sentiment. For example, on the afternoon of September 28, Xuhui also paid 5 due in 2024.
But in October, the situation did not improve. Xuhui insiders said that during the National Day, Lin Zhong led a team to Hong Kong to communicate with relevant banks and bond investors, but failed to reach an agreement. CIFI also made a last-ditch attempt after its shares were suspended last Thursday, but still failed.
As a result, it has made the same choice as all real estate companies: abandon overseas debt and protect domestic debt. Objectively speaking, this is unfair to foreign investors, after all, all creditors at home and abroad should be equal.
Xuhui announced that since September, the market has deteriorated further, sales have been weak, industry financing has become increasingly difficult, and the company's cash flow has deteriorated more than expected. At the same time, part of the company's financing triggered the early payment clause due to the downgrade of the rating, and the pressure of overseas payment increased sharply in the short term. In October, the company had no major new financing at home and abroad, and there were delays in remittances abroad. Even with our best efforts, we may remain under pressure to generate sufficient cash to meet our present and future obligations.
Secondly, Xuhui is a demonstration housing enterprise, and the regulatory authorities have already supported the financing of the demonstration housing enterprise, but unfortunately the plan can not catch up with the changes. In May
2022, the regulatory authorities selected some housing enterprises to be included in the list of bond-issuing demonstration enterprises, among which Xuhui Holdings, together with a few private enterprises such as Country Garden Holdings, Longhu Group and Xincheng Holdings. Since then, the policy has been increased, and the demonstration of private housing enterprises issuing bonds has been further upgraded from providing credit risk mitigation to providing full guarantees.
Xuhui has always been regarded as one of the high-quality housing enterprises with high security. In 2021, Xuhui's sales were close to 250 billion yuan, which was the leading real estate enterprise. According to the data at the end of 2021, The net asset-liability ratio, net debt ratio and cash short-term debt ratio of Xuhui excluding advance receipts were 69.7%, respectively. 62.8% and 2.
Second, due to the consideration of wind control, financial institutions still stop lending and draw loans to housing enterprises. Since this year, institutions including Ping An Trust have been shrinking the scale of real estate business. The capital flow of
real estate enterprises mainly depends on two blood vessels, which are indispensable: one is financing, and the other is sales. The first tube is almost blocked, the second is blocked, and in the long run, no matter how hard you struggle, the blood will slowly run dry. On the morning of September 27,
Lin Zhong posted a message in his circle of friends: Financing is not smooth, sales are weak, and no real estate company can afford to pay back the money!
From the perspective of structural adjustment, the main departments to be abolished are investment and design departments. This means that Xuhui's main idea is to reduce expenditure as much as possible and use the funds to ensure operation and delivery.
This is consistent with Xuhui's current idea of debt restructuring, to exchange time for space, so that the company and management can focus on the delivery of the project and normal operation. Only by continuing to work hard can we ensure that we survive.
After the announcement of debt restructuring was issued, Lin Zhong sent a message to his circle of friends, saying that Xuhui refused to lie flat, but squatted down, which meant that the center of gravity was more stable, which meant that he could stand up better in the future.
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