Wang Weiguo: Founder Group reorganized and submitted a brilliant answer sheet

Wang Weiguo, a professor at the China University of Political Science and Law, recently wrote an article saying that the goal of restructuring the system is to save enterprises and fairly pay off the two. Fundamentally, an insolvency law has a fair settlement as its first priority; Therefore, for the evaluation of a reorganization case, we must first look at the debt settlement plan in its reorganization plan. Recently, the manager of Founder Group announced the progress of the reorganization and sent a draft reorganization plan to the creditors. The specific debt settlement schemes learned from creditors have clear characteristics and advantages over other large group reorganization plans in recent years.

Wang Weiguo further analyzed that an important feature of the reorganization of large enterprises like Founder Group is that most of the assets that can be used to repay debts are the debtor's equity in its subsidiaries. Equity assets are risky and variable in value. How to use equity assets to pay off debts is a difficult problem. The insolvency law's debt settlement system is based on the principle of monetary settlement, with the exception of subrogated settlement of non-monetary property. In view of the depreciation of the value of the immediate realization of equity in the reorganization procedure, the common practice of large insolvent enterprises (including listed companies) in the reorganization plan is "equity for debt", that is, directly allocating the equity discount to creditors to satisfy debts. In practice, the equity discount generally adopts the future value standard. This method of satisfying cash debt with future capital value is essentially a "debt-for-equity swap" investment transaction. For creditors, especially those of financial institutions, the specific arrangements for the transfer of shares are crucial to the protection of their interests, and there are many factors that need to be weighed.

In Wang Weiguo's view, the liquidation plan of founder group reorganization first adheres to the principle of paying off debts with all assets, and deprives all the rights and interests of the original shareholders for debt repayment. This is in stark contrast to the current practice of the controlling shareholders in some reorganization cases of listed companies unscathed, only through the book operation of "capital reserve conversion to increase equity capital", and to add new water injection shares to pay off debts.

Secondly, the plan gives a one-time cash full repayment of the claims secured by property within the scope of priority repayment, which is in line with the legislative policy of the Enterprise Bankruptcy Law to protect secured claims, and is also conducive to the restoration of the credit of the reorganized enterprise, which deserves full recognition.

Third, the scheme provides ordinary creditors with the option of "cash + equity for debt", "all cash" and "cash + debt retention", which reflects the position of respecting creditors and abandons the improper practice of forcing bank creditors to accept shares to pay debts in some cases. Among them, the equity value used for debt redemption is supported by the new asset entity established by the reorganization, and the stock price has been reasonably calculated and valued, so that the creditor can really obtain the corresponding value of the settlement and share the operating income.

Fourth, it is worth noting that the plan also provides a bottom-up repurchase exit mechanism for creditors who choose to pay for debt with shares, that is, the reorganization investor undertakes to undertake the obligation of equity repurchase at the agreed stock price, so as to offset the risk of depreciation of the debt-covered equity and improve the degree of protection for creditors. This kind of equity-to-debt method with repurchase rights is worth promoting in future practice.

Fifth, the cash payments of ordinary creditors are significantly higher than those of other large group reorganization projects. Large group reorganization schemes in the market usually convert all debt into equity for ordinary creditors, and rarely arrange cash settlements, while the creditors of Founder Group who choose to transfer shares can also obtain 20% cash repayment, plus the final repayment rate of the equity transfer part reaches 61%, and the one-time cash repayment rate of creditors who choose all-cash settlement and the final cash repayment rate of creditors who choose to retain debts exceed 30%.

From the perspective of enterprise rescue, Wang Weiguo said that the restructuring of Founder Group also has bright spots in program selection and asset restructuring. The advantage of the reorganization system lies in the fact that the creditor's liquidation interest is placed on the operating value of the enterprise, and the future value of the assets covers the current debt. In today's large-scale corporate reorganization cases, the abuse of mergers and bankruptcies is worrying. In the case of some members of the enterprise group being in financial difficulties, some affiliated enterprises that do not meet the conditions for merger were forcibly pulled into the substantive merger bankruptcy procedure on a large scale, which on the surface seemed simple and effective, but in fact it damaged the interests of the relevant creditors and seriously affected the normal ecological environment of the company's operation. The abuse of substantive merger and reorganization has harmed the healthy development of the bankruptcy system and impacted the order of relevant laws such as the Civil Code and the Company Law.

Wang Weiguo believes that in the reorganization of Founder Group, first of all, in terms of program selection, only the "1+4" holding platform in the group is included in the reorganization procedure, and the remaining more than 400 affiliated enterprises maintain normal operation. This creates favorable conditions for protecting the operating value of enterprises and introducing external financing. However, the large debts of the subsidiaries are not included in the reorganization, and the investor-controlled New Founder Group will be borne and paid off through a market-oriented mechanism, reducing the losses of financial institutions. Secondly, in terms of asset restructuring, the restructuring plan classifies the debtor's assets, sets up New Founder Group and its subsidiary business platform companies with "retained assets", and sells part of its equity to the restructuring investors to obtain debt repayment funds, and the remaining equity is used to pay off debts. As for the "assets to be disposed of" that have been stripped out, they are entrusted to professional institutions to manage and dispose of them in the form of trusts, and supplement the payment of fees and debts with the income they obtain. On the basis of resource optimization and integration, the reorganization plan formulated a business plan for New Founder Group for future business upgrading, operation efficiency improvement and asset appreciation. The resulting expectations are conducive to boosting the confidence of restructuring investors, creditors who accept equity for debt and employees of enterprises, and are also conducive to the recovery of credit after the reorganization of enterprises.

Wang Weiguo said that in short, the reorganization of Founder Group has broken through some of the usual operations of reorganization practice in recent years, adhered to the primary goal of fully protecting the interests of creditors, and in the case of large group debts and scattered creditors, through careful design and full consultation, the debt repayment plan can better meet the demands of the vast majority of creditors, providing a typical case of fair settlement and enterprise rescue in accordance with law, rationality and efficiency for the reorganization practice of China's large enterprises, especially group enterprises.