Tagged: cycle

China Fortune Debt Tribulation: 54 billion quilt

After the “three red lines”, some high-leverage real estate companies have to bear huge debt repayment pressure in order to comply with regulatory requirements. Among them, real estate companies that hold a large amount of non-residential real estate are even more serious.

They either hold a large amount of commercial real estate, or build cultural tourism projects, or bet on industrial parks. The task of reducing leverage is even more difficult for them. Whether these former star real estate companies can turn dangers into bargaining and go through the cycle, “Prism” will pass the “Real Estate Companies Money Difficulties” series to see where they go.

This is the first article in this series, about China Fortune.

Author|Sun Chunfang Editor|Li Chaoren

China Fortune Debt Tribulation: 54 billion quilt

Production|Prism·QQ Music News Xiaoman Studio

“It is said that Hedong for thirty years and Hexi for thirty years. It is only six years before the river is gone.” Li Gang, an “old” employee who has been in China Fortune for more than seven years, recalls the company’s presence in Hainan in 2016. At the annual meeting, he still reminisces about the grand occasion of “seafood as a mountain and beer as a sea”, but now, “thanks to the goodness of being able to get a full salary at the end of the year, the year-end award is simply not to be expected.”

After the holiday, the debt problem of China Fortune Land Development continued. On February 26, China Fortune Land Development (600340.SH) announced that the company’s subsidiaries have added a total of 5.817 billion yuan in principal and interest of overdue debts, including bank loans, trust loans, overseas bonds and other forms of debt. Up to now, the company has accumulated principal and interest of overdue debts. A total of 11.054 billion yuan.

Wang Wenxue, the head of China Fortune Happiness, is abandoning the car to protect the handsome, and is doing his best to repay the debt. On February 28, Visionox, another listed company held by it as the actual controller, announced that the company’s major shareholder will transfer 11.7% of Visionox shares held by him, and the counterparty is a state-owned asset background. According to the latest stock price, this part of the equity can be cashed in about 1.6 billion yuan. After completion, Wang Wenxue will hand over the position of the actual controller of Visionox.

Wang Wenxue, the head of Huaxia Happiness
In fact, the financial crisis of China Fortune Happiness has initially appeared in 2018. At that time, Ping An Group appeared in a timely manner as a “golden master”, which made the situation turn for the better. However, for more than two years, the two sides looked close together. On the one hand, as the stock price of China Fortune Land continues to fall, Ping An’s floating loss has exceeded 10 billion yuan, involving a total risk exposure of 54 billion yuan; on the other hand, after Ping An’s acquisition of the ownership, while bringing capital, it vigorously develops commercial real estate. , Is believed to have accelerated the tightness of Huaxia Fortune’s funds.

In Huaxia Fortune, Li Gang moved to Gu’an, Jiashan, Wuzhi and other parks, and he had a deep affection for the company. He remembered that “At the 2016 Hainan Annual Meeting, the chairman said bitterly about the history of entrepreneurship on the stage, and he cried when he talked about emotions. Field”, he was still emotional. Time passed, Li Gang once again witnessed the boss’s painful report. At the employee meeting in early February this year, Wang Wenxue described the company’s current difficulties and self-criticized the major mistakes in the development process. Finally, “he called on the employees to show their loyalty. Come and overcome difficulties with yourself.”

Prosperity and death also sudden, the same wealth and easy, the same difficulties, who wants to calculate the account of Huaxia Happiness together with Wang Wenxue.

Available funds on the book are only 800 million yuan

Once, with hundreds of billions of funds lying on Huaxia Fortune’s books, the energetic Wang Wenxue was even more in the capital market. In addition to real estate, he also controlled a number of listed companies such as Black Bull Food (ie Visionox). In addition, Zhihe Capital was established to spend a lot of money to invest in new energy vehicles, smart travel, OLED and other industries.

Today, according to China Fortune’s pre-holiday announcement, the amount of financing principal and interest to be repaid at maturity is 55.9 billion yuan, net cash flow of financing after excluding major shareholders’ support-37.1 billion yuan; the company’s monetary capital balance is 23.6 billion yuan, including various types The restricted funds are 22.8 billion yuan, and the available funds are only 800 million yuan.

“They said that the period at the end of 2020 is too torturous, and they are struggling with the scheduling of capital positions every day. They have to connect with the finances of the various parks and projects underneath, explain to hundreds of financial institutions, and are related to the government and financial supervision. According to the department’s report, there are a lot of things, and they often work overtime all night.” Before the Spring Festival, several of Li Gang’s old colleagues who worked in the financial department of China Fortune Fortune’s headquarters finally resigned because of “unfinished work”.

Money is the biggest lifeline of China Fortune Happiness now. Not only the employees of the financial department can’t support it, but the financial chiefs are also so busy that they “collapse” and are struggling to deal with their creditors. At the company meeting on February 2, Wang Wenxue said frankly that at the beginning of the meeting he pulled Wu Zhongbing, the vice president of China Fortune Land Development, who was in charge of finance, and later he pulled Jiang Wei, the professional deputy general manager of the financing center, and Jiang Wei couldn’t open it anymore. Fan Zheng, a senior manager of the financing center, was assigned, and in the end, Fan couldn’t open it.

China Fortune Land Development’s debt is huge. According to the 2020 mid-year report, its total financing amounted to 203.591 billion yuan, of which bank loan balance was 46.560 billion yuan, the ending balance of bonds and debt financing instruments was 88.99 billion yuan, and the balance of other financing such as trust asset management was 68.04 billion yuan; in addition, its At the end of the period, the company’s external guarantee amounted to 155.837 billion yuan, of which 155.238 billion yuan was guarantee to its holding subsidiaries.

There are huge interest expenses under huge debts. The financial report shows that the weighted average cost of China Fortune Finance is 7.96%, of which the average interest cost of bank loans is 6.12%, the average cost of bonds and debt financing instruments is 7.38%, and the average interest cost of other financing such as trust asset management is 10.15%.

As the most important source of repayment and cash cows, residential real estate sales have been sluggish for years and hit new lows repeatedly. Last year, China Fortune Land Development’s real estate sales were only 96.3 billion yuan, a year-on-year decrease of 33.68%, ranking among the real estate companies in their annual sales. China has fallen out of 40.

In fact, compared with other real estate companies, China Fortune Land also has a large number of industrial parks, which can be financed through government accounts receivable, which has wider financing channels than general real estate companies. However, due to the epidemic and macro reasons, Some parks have problems with payment collection. At the end of the third quarter of 2020, China Fortune Land Development’s accounts receivable amounted to 54.774 billion yuan, while the accounts receivable at the end of 2017-2019 were RMB 18,344, and 46.8 billion yuan respectively. China Fortune Land Development’s accounts receivable were mainly from the governments where industrial parks are located. The fees to be paid.

On January 11 and 12, several US dollar bonds and domestic bonds of China Fortune Land Development fell sharply; on January 13, Moody’s rated China Fortune Land Development’s Ba3 corporate family and China Fortune Land Development (Cayman) Investment Co., Ltd. supported senior unsecured The rating was downgraded to B2. As a result, China Fortune’s debt crisis completely detonated.

A person in the trust industry told the author that on that day, Wang Heming, the head of China Fortune Fortune’s Overseas Financing Department, gave an explanation to the financial institution, but there was no question and answer session at the meeting. “Wang said that investors can rest assured, everything is subject to the announcement. Said nothing”.

This “nothing to say” conference call caused the creditors to fall into greater panic, so it gave birth to the debt committee of China Fortune Land Development on February 1.

“Fishing also needs bait and steamed buns”

The day after the debt committee was held, Wang Wenxue briefed the company’s core cadres on the basic situation. In addition to telling the staff about brotherhood and boosting morale, he also talked about the substantive issues that everyone cares about most: What should China Fortune Happiness do next?

Wang Wenxue said that the core of China Fortune Future is to do everything possible to operate in an orderly manner. He quoted to the employees the words of a president of the debt committee, “fishing also requires bait and steamed buns”, and orderly management is bait and steamed buns. The company needs to ensure the stability of its employees, the safety of assets, the stability of its operations, take the initiative to slim down and shrink its balance sheet, and revitalize its realizable assets. At the same time, to reduce costs and increase efficiency, the core management must reduce salaries. “In the new industrial city, we have to do what we need to do, we have to recruit for investment, we have to build the Peacock City, and we have to sell it,” Wang Wenxue said.

Regarding the most urgent debt repayment plan, China Fortune Land Development said at the Debt Committee: Through the rapid disposal of assets, raising the level of funding, revitalizing existing resources, increasing the value of assets, and introducing strategic cooperation, the normal plan is implemented in stages, Strive to reach a win-win solution for multiple parties as soon as possible, and make every effort to maximize the protection of the fundamental interests of all creditors.

“The translation of this statement is: Don’t push the creditors too eagerly, or you won’t survive if I die.” Wang Ping, a business manager of Zhongrong Trust, told the author that the so-called war and asset selling are now called , It’s all something later, the most urgent thing is to talk about debt extension and replacement.

According to a report by foreign media REDD on February 18, China Fortune Land Development plans to roll out its 25 domestic bonds totaling 46.9 billion RMB for 3 to 5 years, but the plan will face resistance from some investors because the plan does not provide enough upfront. Cash repayment.

In the short term, China Fortune Land Development needs to stabilize its creditors, but in the long term, the return of funds is still fundamental. In fact, China Fortune Land Development has set up a revitalization team to dispose and revitalize existing assets. For example, in 2020, it has promoted some projects to enter the revitalization process, realized a return of 6.07 billion yuan, and carried out four large-scale residential promotion activities to increase sales returns. The amount is about 3.5 billion yuan.

“In the past few years, China Huaxia started to cooperate with other real estate companies to develop land around Beijing, but the proportion is not high. If the value of this part of the goods continues to be transferred and co-developed, a lot of funds can be released.” Li Gang told the author, Huaxia Fortunately, Happiness previously had heavy warehouses around Beijing, and currently there are still a lot of land reserves, “but the current Beijing market is still relatively bleak, which affects the speed and valuation of this part of the asset disposal.”

In Wang Ping’s view, compared with real estate companies such as Tahoe Group and Fusheng that were thundered before, Wang Wenxue has been relatively courageous in dealing with the debt crisis this time. “Because Tahoe is doing high-end real estate, the boss feels that the pre-sale price set by the local government is too cheap, so wait and wait again, delaying the opportunity, and the same is true when introducing the war.” A former high in Tahoe Group. Guan said to the author. Tahoe CEO Huang Qisen seemed indecisive when dealing with assets.

“The debt crisis is most afraid of the stampede effect. As soon as I heard that this company was going to end, dozens or even hundreds of financial institutions went to berserk the company’s assets. As a result, you took the official seal, I took the house, and he took the property rights. In the end, no one could completely dispose of this asset, and the company could not continue to operate normally. In the end, all the players lost, and all parties lost.” Wang Ping told the author, “Wang Wenxue immediately coordinated with the local government and agreed with Ping An. , Industrial and Commercial Bank of China (601398.SH) communicated with the largest creditors, and brought the major regulatory agencies over to immediately convene the debt committee to stabilize the position in time and avoid the chaos of a stampede effect caused by many creditors fighting each other. “.

The price of inflation

“I have done this today, I am willing to bet and lose”, this is what Wang Wenxue said at the core staff meeting on February 2.

Like many housing companies, China Fortune is also popular in running culture. Wang Wenxue is an in-depth long-distance running enthusiast. He wakes up at five o’clock every day to run, and he can hardly beat the thunder. He doesn’t waste more than an hour of running time, or listens with headphones. In the course of paying for knowledge, you either set up a question before running and think about it as you run. After you finish running, the problem will be figured out.

However, why China Fortune has come to this situation, I am afraid that Wang Wenxue can not figure it out in a single run.

At the company meeting on February 2nd, Wang Wenxue summarized several major problems in the development of Huaxia Happiness in his self-criticism: First, misjudged the situation in Beijing, the investment was too concentrated, and the volume and price of the property market in Beijing had dropped. , The cumulative impact of the company’s sales receipts over the past four years has exceeded 100 billion yuan, and it has also seriously affected the value of the new industrial city’s receipts and inventory receivables; the second is that the new extension area is still being cultivated, and its contribution to the company’s performance is limited; the third is the pre-expansion Radical, insufficient management, over-emphasis on scale and neglect of benefits; in the end, multiple rounds of epidemic shocks made the situation worse.

As for the summary of the boss Wang Wenxue, apart from the fourth point of the epidemic, the first three issues have been generally recognized by the employees of China Fortune Land Development.

Around 2016 and 2017, China Fortune Land Development Group sold its real estate in Beijing, and the company’s annual sales quickly entered the top ten real estate companies. During the most beautiful period, China Fortune Land Development Co., Ltd. received high salaries from leading real estate companies such as Vanke and some international companies. A large number of senior executives were recruited from the consulting company, and its industrial parks have expanded from the Beijing-Ring to the Nanjing, Zhengzhou and other regions.

“At that time, China Fortune Land Development and Tahoe were the most reconciled and inflated in the real estate industry, and the salaries offered by digging people were several times higher than the industry average.” An employee from China Fortune Land Development in Zhejiang told the author. At that time, the company was new to the company. To open up a region without any business, it will recruit a large wave of investment and investment promotion and investment promotion people. When these people were later streamlined, 90% of them did not stay.

The investment team of China Fortune Land Development is luxurious. “The company headquarters also dug officials at the directorate level from some government departments. In local areas and parks, it also dug some officials from the local government. The remuneration was very high.” An employee in the Zhejiang area said that Wang Wenxue’s vision at the time Open enough to enter the world and set up an international headquarters in Singapore. The task is to promote overseas business development, focusing on the development of regional markets such as Asia, Europe, North America and Africa. In addition, China Fortune Land Development has established locations in Indonesia, India, Thailand, Myanmar, and Egypt. Permanent institution.

In fact, the “expansion” problem mentioned by Wang Wenxue has already begun to “scrape the bones” after China Fortune Happiness encountered a crisis for the first time in 2018 and introduced Ping An Group as a second shareholder.

Ping An introduced a new management team headed by Wu Xiangdong, the former head of China Resources. After Wu Xiangdong became the CEO of China Fortune, he drastically abolished business such as industrial towns. The expansion of new projects and new areas also requires strict financial accounting. The problem of “expansion” has since been contained.

In November 2018, a large-scale layoff of the industrial town group of China Fortune Land Development was eventually disbanded. Except for the backbone of the business and the existing urban business departments, all social recruitment employees were abolished, and the school recruitment was arranged to go to other groups. ; In March 2020, China Fortune Land Development has carried out a new wave of layoffs and regional mergers.

There is no doubt that Ping An’s entry has given China Fortune Fortune, a local private housing company in Langfang, which has a rather “sloppy” atmosphere. At least in terms of personnel and business expansion, it quickly pressed the pause or even the reverse button. However, it has also become the beginning of another “expansion”.

Success is also safe, and failure is also safe

After Ping An entered China Fortune Land Development, in addition to the industrial real estate led by Wang Wenxue, it tried to make China Fortune Land Development vigorously develop commercial real estate, long-term rental apartments, pension real estate and other businesses, and put Wu Xiangdong and other former China Resources Land executives in charge. This strategy of drifting away from the original main business of China Fortune Land Development did not meet expectations.

“Commercial real estate investment is large and returns are slow. For example, a commercial real estate project of China Fortune Land Development in Wuhan cost more than 10 billion yuan. In addition to construction and operation, the amount of funds is huge. There are several similar projects across the country, and China Fortune Land Development is under financial pressure. It’s even bigger.” A former China Resources Land executive told the author that China Fortune Land Development’s commercial real estate development after Ping An took over was also a major factor that dragged down its funds.

The financial report shows that in the first three quarters of 2020, China Fortune Land Development’s net outflow of operating cash flow was 25.073 billion yuan, of which land acquisition expenditure was 19.849 billion yuan, industrial new towns and related businesses reached 9.646 billion yuan, and commercial real estate and related businesses reached 10.203 billion yuan. More than the new industrial city. In the first three quarters of 2019, all its land acquisition expenditures were industrial new towns and related businesses, reaching 17.373 billion yuan, and commercial real estate expenditures were still zero.

“Speaking of conscience, after Ping An became the second shareholder, it has provided China Fortune with a lot of convenience in financing, but all of them have to repay the principal and interest. Ping An Investment