Shanghai Pudong Development Bank and Minmetals Trust took the lead in participating, and the risk clearance of housing enterprises accelerated

(Text/Zhang Zhifeng Editor/Yo-Yo Ma) After experiencing several rounds of large-scale housing enterprise explosions, the central bank and the Banking and Insurance Regulatory Commission jointly expressed their position to encourage banks to carry out M&A loan business in a sound and orderly manner, focusing on supporting high-quality real estate enterprises to merge and acquire high-quality projects of large-scale real estate enterprises that are in danger and difficult.

A wave of mergers and acquisitions in the real estate industry is surging and varied.

In the past few days, two major central enterprises, China Merchants Shekou and OCT, have successfully issued 4.5 billion yuan of total M&A bonds between banks, Shanghai's veteran state-owned bank Pudong Development Bank has issued the first real estate project acquisition theme bond of 5 billion yuan, and minmetals trusts under the central enterprise Minmetals Group have also crossed the border to rescue the scene, connecting two projects under construction in Panhengda.

From high-quality state-owned housing enterprises issuing bonds between banks, to banks directly participating as bond issuers, and then to state-owned assets trusts directly entering the market to close mergers and acquisitions, many people realize that this merger and acquisition wind will blow bigger and bigger, and the decline of the industry may be reversed.

Pan Hao, a senior analyst at Shell Research Institute, told the Observer Network that the current attitude of the state to resolve industry risks and support M&A transactions between housing enterprises is very obvious, which is conducive to the healthy development of the overall real estate industry, and it is expected that under the premise of last year's low base, the real estate industry will experience a substantial increase in the M&A market in 2022.

However, in Pan Hao's view, the current wait-and-see mood of mergers and acquisitions between housing enterprises is still there, the industry risk has not been fully cleared, and the potential debt risk of the project company is unknown, so it is difficult to carry out large-scale mergers and acquisitions in the short term. However, with the increase of M&A transactions, M&A rules and industry norms will become more and more clear, and some qualified financial institutions will have more room for development.

Housing enterprises have raised questions about mergers and acquisitions

In fact, as early as the beginning of this year, there was continuous market news that banks informed some large high-quality housing enterprises that for the debt-bearing acquisition of insurance enterprise projects, the relevant merger and acquisition funds were not included in the supervision of the "three red lines".

This is equivalent to loosening the shackles on some powerful and ambitious housing enterprises, otherwise even if the bank is willing to borrow, there are few housing enterprises whose debt scale is allowed to be collected.

As soon as the news came out, the relevant local departments immediately began to lead the central enterprises, local state-owned enterprises and insurance housing enterprises to negotiate and discuss mergers and acquisitions.

On January 12, China Merchants Shekou tasted the first list of insurance housing enterprise project M&A bonds, announcing the completion of the registration of the first phase of medium-term notes (mergers and acquisitions) with a scale of 3 billion yuan this year, of which 1.29 billion yuan was used to repay a loan arising from the acquisition of old renovation projects, the remaining 210 million yuan was used for future projects that met the requirements of mergers and acquisitions, and the remaining 1.5 billion yuan was still used to repay the company's bank loans.

Moreover, the 1.29 billion yuan used to repay the past M&A loan was the old renovation project of 17 Neighborhood in Hongkou District, Shanghai, and the acquired party was still under the umbrella of Shanghai Real Estate, a state-owned real estate enterprise in Shanghai, not a real estate enterprise.

On January 17, another central enterprise, OCT, followed. According to the information disclosed by the National Interbank Lending Center, OCT has recently issued the first medium-term notes of 2022, with a total issuance scale of 1.5 billion yuan. Among them, 960 million yuan was used to repay past M&A loans, and 540 million yuan was used to repay the issuer's working capital loans.

According to the prospectus, the attempt to repay the "M&A loan" also occurred a long time ago.

In November 2016, OCT (Yunnan) Investment Co., Ltd. (hereinafter referred to as "Huayun Investment"), a wholly-owned subsidiary of OCT Group, acquired 51% of the equity of Yunnan World Expo Group in monetary form, and in December 2016, Huayun Investment acquired 51% of the equity of Yunnan Cultural Investment Group, and the two equity acquisitions were completed in March 2017.

The above-mentioned Huayun Investment M&A loan totaled 4.25 billion yuan, and the loan term was 5 years, which was due recently.

In other words, although the bonds issued by the two central enterprises are called "M&A bonds", most of the funds are still used to repay the debts accumulated before, as well as for the mergers and acquisitions that have been completed in the past, and have little to do with the current thunderstorm housing enterprises. This has also caused many voices in the industry to question whether it is "dedicated to special funds".

In this regard, Zhang Bo, president of the 58 Anchor Research Institute, believes that the doubts in the market are pure speculation, and from the perspective of bond issuance rules, special funds are the most basic, and there is generally no such loophole. Encourage mergers and acquisitions of debt to benefit large central enterprises and state-owned housing enterprises, but in the short term, how the market prospects are still doubtful; but in the long run, the initiative to acquire insurance housing enterprise projects is bound to increase, and high-quality housing enterprises will not miss such development opportunities.

Banks, trusts and other institutions actively participate

So unlike the previous two M&A bonds, spousal development bank recently announced in the interbank bond market that it will issue real estate project M&A theme bonds on January 21, with a scale of 5 billion yuan and a term of 3 years, and the funds raised will be used for real estate project M&A loans.

The issuer of the bond is not a housing enterprise, but a bank, and the use of this fund is emphasized, which should be spent on the projects of large real estate enterprises with insurance and difficulties.

Although the initial offering is only 5 billion yuan, compared with the current industry situation, the industry generally believes that its signal significance is obvious, and it is not excluded that other banks will have the same action. This also means that high-quality housing enterprises want to acquire thunder-bursting housing enterprise projects and have real financial support.

SPDB said that in accordance with the principles of legal compliance, risk controllability and commercial sustainability, it will steadily and orderly promote the investment of raised funds, focusing on supporting high-quality real estate enterprises to merge and acquire high-quality projects of large-scale real estate enterprises with insurance and difficulties.

At the same time, we should strengthen risk control and post-loan management, do a good job in monitoring the use of funds, help the virtuous circle and healthy development of the real estate industry, and further play the positive role of financial bonds in promoting economic restructuring.

In addition to the financial support provided by the bank as the issuer of bonds, the Minmetals Trust, another central enterprise, Minmetals Group, as a state-owned non-bank financial institution, has also begun to quietly enter the market.

According to Tianyan, kunming hengtuo real estate co., ltd. (hereinafter referred to as "Kunming Hengtuo"), which was originally a subsidiary of Evergrande Group, and Yingqin Real Estate Development Co., Ltd. of Shunde District of Foshan City (hereinafter referred to as "Foshan Yingqin"), have undergone industrial and commercial changes in succession, and the takeover parties are minmetals trusts.

In response to this matter, Minmetals Trust responded that in the face of Evergrande risks, Minmetals Trust has improved its political position, always taking "ensuring the delivery of buildings, ensuring people's livelihood and ensuring stability" as the action plan, taking the protection of the interests of investors as the primary goal, and actively seeking diversified responses and solution paths for assets.

After repeated demonstrations, Minmetals Trust believes that promoting the normal operation of the project by obtaining all the equity and management rights of the project company is the best solution to the current problems of Evergrande project.

Yan Yuejin, research director of the think tank center of E-House Research Institute, told the observer network that taking banks as the main body of bond issuance, or trusts and other financial institutions directly participating in mergers and acquisitions, can indeed accelerate the industry to clear the risk. Especially trusts and other institutions, more from the perspective of investment income to look at the problem, similar project acquisition costs are not high, and the current financing opportunities are large, it is a new acquisition force, in the financial operations, especially in the disposal of rotten buildings, there are better financial ideas and financial support.

At the same time, Yan Yuejin also pointed out that the trust company does not have real estate development qualifications, but it can lead the formation of development companies or introduce other companies to participate, so it will not affect the subsequent development of the project, and participating in mergers and acquisitions is also in line with policy expectations, and there may be more and more in the future.

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