THE SEQUEL OF BAK POWER'S "SERIAL BONDS" SUFFERED A LOSS OF 1.776 BILLION MORE THAN HALF OF THE SHARES WERE PLEDGED AND FROZEN TO COMMIT TO XINLI FINANCIAL TO GET OUT OF TROUBLE

Yangtze River Business Daily news ● Yangtze River Business Daily reporter Cai Jia

Jailed BYK Power launched a third assault on A shares.

On the evening of November 24, Xinli Financial (600318. SH) disclosed the restructuring plan with BAK Power, the listed company intends to dispose of the equity of five companies in its financial business, and place 75.6234% of the equity of BAK Power, and the difference is purchased by Xinli Financial in the form of issuing shares, while raising supporting funds. At present, the price of this transaction has not yet been determined.

The reporter of Changjiang Business Daily noted that this is the third time that BAK Power plans to commit itself to an A-share listed company. Previously, in 2017 and 2018, Changxin Technology (300088. SZ) and Zhongli Group (002309.SZ) each planned to take a controlling stake in BAK Power, but neither of them was able to do so, and only a small part of the shares were realized.

In 2019, due to the impact of the unpaid payment of the audience Tai Automobile and Huatai Automobile, BAK Power and a number of listed companies fell into "serial bonds", and the capital chain problem immediately broke out.

Despite being in the popular new energy lithium-ion battery track, as a target of restructuring, the asset quality of BAK Power is still poor, and the sequelae of "serial debt" still exist. The restructuring plan also disclosed that from 2019 to the first nine months of 2021, BAK Power continued to lose money, and the cumulative loss of net profit attributable to the mother was 1.776 billion yuan.

At present, BAK Power still has a large number of pending lawsuits and large unpaid debts, and some debts have been overdue, there are bank accounts frozen, the cumulative number of pledged shares accounts for 61.57% of the company's total share capital, the number of frozen shares accounts for 54.8831% of the company's total share capital, of which the company's major shareholders BAK Battery and Tibet Haoze held the company's shares have all been pledged and frozen.

Xinli Financial plans to reorganize and transform in five years through backdoor

The restructuring of Xinli Financial and BAK Power will be divided into three parts: major asset replacement, issuance of shares to purchase assets and raising supporting funds.

Specifically, Xinli Financial intends to dispose of the equity of five companies mainly engaged in financing guarantees, small loans, pawns and financial leasing held by it as listed companies, and replace them with the equivalent part of all the equity of the target company held by BAK Battery or Tibet Haoze.

The assets to be placed are 75.6234% of the equity of BAK Power, and Xinli Financial intends to purchase the difference between the transaction price of the assets to be placed and the assets to be placed by issuing shares to the counterparty. Upon completion of the transaction, BAK Power will become a holding subsidiary of the listed company.

In addition, Xinli Financial also intends to raise supporting funds from the non-public issuance of shares by no more than 35 specific investors for the construction of the target company's project, supplementary working capital and payment of intermediary fees.

After the completion of the transaction, the relevant shareholders of BAK Power, BAK Battery, Tibet Haoze, Changxin Technology, Zhongli Group and Chen Qi are expected to hold more than 5% of the shares of the listed company. However, before and after the transaction, the controlling shareholder and actual controller of Xinli Financial were still Xinli Group and Anhui Supply and Marketing Cooperative Union.

The reporter of Changjiang Business Daily noted that the growth of Xinli Finance, which focuses on financial business, has been weak in recent years. Under the background of the relatively slow transformation of the original business, listed companies urgently need to enhance their competitiveness by injecting differentiated assets.

According to the data, Xinli Financial, formerly known as Chaodong Shares, completed the backdoor listing in 2016, and is currently mainly engaged in financing guarantees, small loans, pawns, financial leasing, software and information technology services.

In the first year of backdoor listing, Xinli Financial achieved operating income of 811 million yuan and net profit of 163 million yuan in 2016. However, the following year, the company lost 309 million yuan, and although it turned a profit, its profitability declined significantly.

From 2018 to 2020, Xinli Financial achieved operating income of 533 million yuan, 518 million yuan and 492 million yuan respectively, a year-on-year decrease of 15.77%, 2.97% and 4.89% year-on-year, and net profit of 52.9713 million yuan, 32.2807 million yuan and -8 million yuan.

In the first three quarters of this year, Xinli Financial achieved operating income of 305 million yuan, a year-on-year decrease of 14.34%; net profit of 8.8846 million yuan, a year-on-year decrease of 69.51%.

After the completion of this restructuring, Xinli Financial will inject lithium-ion battery business to provide the company with new business growth points, and if the development of BAK Power meets expectations, it will improve the company's profitability.

Two years after the outbreak of "serial debt", the sequelae still exist

In fact, this is already the third time that BAK Power has hit A shares. However, compared with the previous two times, BAK Power, which was seriously injured by the "serial debt", was obviously discolored as a target of restructuring.

In 2017, Changxin Technology plans to acquire a 75% stake in BAK Power for 6.75 billion yuan. In February 2018, Zhongli Group announced the acquisition of 100% of the equity of BAK Power for 10 billion yuan. Although neither of the two acquisitions has been successful, the two listed companies have completed the shareholding of Bak Power, and the current shareholding ratio is 11.674% and 8.2927% respectively, which is the third and fourth largest shareholders of BAK Power and the transferor of the shares in this restructuring.

Until 2019, BAK Power and a number of listed companies fell into "chain debt", due to the impact of the audience Tai Automobile and Huatai Automobile's unpaid payment, BAK Power exposed cash flow problems, at that time for BAK Power to provide lithium battery materials for the A-share listed companies Rongbai Technology, Dangsheng Technology, Xinjiubang, Hangke Technology and other listed companies were owed by BAK Power, the problem of overdue accounts receivable have been exposed.

On June 28 this year, Ronbay Technology disclosed that the company's overdue accounts of 208 million yuan for BAK Power have been fully recovered. From this point of view, BAK Power seems to be relieved about the problem of financial pressure.

However, the sequelae of "serial bonds" still exist, and BAK Power has not given up on impacting the capital market. According to financial data, from 2019 to the first nine months of 2021, BAK Power achieved operating income of 1.383 billion yuan, 1.564 billion yuan and 1.69 billion yuan respectively, and net profit attributable to the mother was -768 million yuan, -1 billion yuan and -7.3628 million yuan, with a cumulative loss of 1.776 billion yuan. During each reporting period, the company's gross profit margin was -12.04%, -0.41% and 13.62%, respectively, of which the first nine months of this year have been positive.

As of the end of September this year, BAK Power had total assets of 4.732 billion yuan, net assets of 2.141 billion yuan, and a consolidated asset-liability ratio of 54.58%.

BAK Power admitted that due to the impact of some customers * ST Zotye (000980.SZ, the former Zotye Automobile), Huatai Automobile and other their own operating difficulties, BAK Power's accounts receivable collection was blocked, resulting in arrears of some suppliers, unable to return bank loans in time, and great financial pressure. Since 2021, the debt pressure of BAK Power has eased, but due to the uncertainty of large capital expenditures and large accounts receivable recovery, BAK Power's operating funds are still relatively tight.

At present, most of the shares of BAK Power have been pledged or frozen. According to the restructuring plan, the 29.1434%, 22.6369%, 8.29% and 1.5% equity of BAK Power held by BAK Battery, Tibet Haoze, Zhongli Group and Chen Jianya are in the state of pledge, accounting for 61.57% of the total share capital of BAK Power. Among them, all the shares of the company held by BAK Battery and Tibet Haoze and the 3.1028% of the shares held by Chen Jianya are in a state of judicial freezing, accounting for 54.8831% of the total share capital of the company.

As a new buyer of BAK Power, xinli financial strength is far less than the previous few acquirers, but for the current BAK power, restructuring in the form of asset replacement seems to be the only choice for it to approach the capital market again.

As there are still a large number of pending lawsuits and large outstanding debts of BAK Power, and some of the debts have been overdue, there is a situation where bank accounts are frozen, after the completion of this transaction, although Xinli Financial has obtained control of BAK Power to achieve transformation, it still needs to undertake the above-mentioned business risks of BAK Power, and whether the integration effect between the two can meet expectations still needs time to test.

Editor-in-charge: ZB

This article originated from the Yangtze River Business Daily