On March 14, Zhengrong Service Group Limited announced that the directors were informed by Mr. Ou Zongrong, the controlling shareholder of the Company, that Weizheng Holdings Limited, a company wholly owned by Mr. Ou, would complete the transfer of 253,141,168 shares (accounting for approximately 24.40% of the issued share capital of the Company) to Huabo Trading Co., Ltd. on March 17, 2022.
The purpose of the transfer is to repay a loan guaranteed by Mr. Ou and Wei Zheng and payable to Fujian Huamin. The creditor of this loan is Huabo's parent company, Fujian Huamin Import and Export Co., Ltd., which also reveals that Ou Zongrong's equity transaction itself is an operation of property enterprise equity debt.
Another protagonist of the story, Huabo Trading, is controlled by Fujian Huamin Import and Export Co., Ltd., which is mainly engaged in import and export trade, biomedicine and mining investment, while Fujian Huamin Import and Export Co., Ltd. was founded in 1986 as a leading foreign trade enterprise in Fujian Province, and both companies are the enterprises behind Liu Pingshan.
Liu Pingshan and Zhengrong have a great relationship, holding the original shares of Zhengrong Real Estate and Zhengrong Service two listed companies.
At the same time, Huabo Trading has undertaken that it will not sell (whether directly or indirectly) any such shares for one year from the date of transfer, which also demonstrates its support for Zhengrong.
Once the share transfer is completed, Ou Zongrong and his family members will own 44.43% of the issued share capital of Zhengrong Services through their investment companies, Huabo will own 24.40% of the issued share capital, and Ou Zongrong will remain the first controlling shareholder.
As of the close of trading on the morning of March 15, Zhengrong Service rose 1.89% at HK$1.08/share; as of the close of the day, it fell 13.21% at HK$0.92/share.
Debt resolution
As early as February, Zhengrong Real Estate Group Limited announced that on February 22, 2022, 140,000,000 ordinary shares of the company owned by RoYue Limited had been transferred to a third party after exercising its security interest in such shares.
RoYue is wholly owned by Mr. Au Chung Wing, the controlling shareholder of Zhengrong Real Estate, and immediately after the transfer of shares, RoYue's shareholding in the company decreased to 2,080,326,000 shares, representing approximately 47.63% of the total issued share capital as announced on the date of the announcement.
Although he has withdrawn from the first line of company management, Ou Zongrong, as the actual controller of Zhengrong, has sold the equity of Zhengrong services this time, which is undoubtedly an initiative to alleviate the debt pressure of zhengrong.
Since the storm of perpetual debt overdue, Zhengrong, who has been shrouded in the cloud of debt repayment, has been planning to resolve debt pressure during this time. On the February conference call, Zhengrong CFO Chen Weijian said that Under the premise of reducing the scale of liabilities, Zhengrong promoted the transfer of some projects and strived to improve the liquidity situation before the expiration of 2023.
According to the announcements issued by Zhengrong Real Estate on 18 February 2022 and 21 February 2022, Zhengrong Real Estate was unable to refinance existing debts, and it is expected that existing internal resources may not be sufficient to repay debts due in March 2022, and consent was sought for the perpetual bonds originally intended to be redeemed on March 5, 2022, with a total outstanding principal amount of US$200 million.
In addition, Zhengrong Real Estate also made an exchange offer and consent solicitation for five foreign debt due in 2022, of which 4 US dollar bonds had a total outstanding principal amount of US$798 million, and 1 offshore RMB bond had a total outstanding principal of RMB1.6 billion, and 8 US dollar bonds due from 2023 to 2026, with a total outstanding principal of US$2.363 billion.
Up to now, the outstanding principal balance of Zhengrong Real Estate's continued bonds (including asset-backed securities) is 7.024 billion yuan, of which the balance of bonds with maturity and exercise date in 2022 is 3.757 billion yuan, facing greater bond redemption pressure.
Chairman Huang Xianzhi also said bluntly that Zhengrong Real Estate hopes to extend the principal of US dollar bonds due in 2022, alleviate the pressure of a large number of debt maturities, solve the problem of cash flow gaps, and give the company one year to gradually strengthen operating cash flow.
On 7 March, Zhengrong Property Group Limited issued a request for consent for the following notes, and on 4 March 2022, at 4:00 p.m. (London time), it has received the necessary consent for the simultaneous consent solicitation.
The Notes include Notes of Preference due 8.35% due 2024, 9.15% Of Notes due 2023, 8.3% of Notes due 2023, 7.875% of Senior Notes due 2024, 7.1% of Annual Notes due 2024, 7.35% of Notes due 2025, 6.63% of Senior Notes due 2026, and 6.7% of Annual Interest Due 2026.
At the same time, at the meeting, the extension proposal of "Tianfeng-Zhengrong Accounts Receivable Phase I Asset-Backed Special Plan" was passed. The revised redemption plan will increase the principal repayment ratio of the March 17 maturity priority "PR Zhengrong 01" to 20%, and the remaining principal will be repaid for one year, and the expected return on the outstanding principal will continue to be calculated at 6.10% during the rollover period.
Under the pressure of debt repayment, the attempt of equity replacement is nothing less than the Ariadne line group for today's Zhengrong, following the clues and groping to solve the mystery of the dilemma.
The company ran away
For this transaction, the focus of the discussion in the market is inevitably on the "cost performance".
After all, Zhengrong service as a relatively high-quality asset of Zhengrong, more than a month ago the stock price was still more than 4 yuan, and now at the stock price level, the transaction amount may have been reduced by hundreds of millions of dollars for Zhengrong, and the receiver undoubtedly took the shares of Zhengrong service at a lower price.
Huabo is no stranger to Ou Zongrong, who has invested in the Zhengrong system three times before.
In January 2019, Zhengrong Service signed a share exchange agreement with Sky Bridge, a wholly-owned subsidiary of Huabo under Liu Pingshan, whereby Sky Bridge transferred all of its shares in Zhengrong, Fujian Province, to Zhengrong Service, which issued 50,000 shares of $1 per share for Sky Bridge, accounting for 5% of the total share capital of Zhengrong Service.
Retrospectively, Huabo's interest in Zhengrong's service has been there before, and after this transaction, it has become the second largest shareholder of Zhengrong's service area.
Under the pressure of resolving debt, the property sector still maintains the aura of high-quality assets for real estate companies today.
According to the data disclosed in January, for the 12 months ended 31 December 2021, the cumulative contracted sales amount of Zhengrong Real Estate Group, together with its joint ventures and associated companies, was approximately RMB145.643 billion, an increase of approximately 2.64% compared with RMB141.9 billion in the same period last year, the contracted sales floor area was 8.8026 million square meters, and the average contracted selling price was RMB16,500 per square meter.
For the two months ended 28 February 2022, the cumulative contracted sales amount of Zhengrong Real Estate, together with its joint ventures and associated companies, amounted to RMB11,426 million, the contracted sales floor area was 731,600 square meters and the average contracted selling price was RMB15,600 per square meter, of which the contracted sales decreased by 53.56% year-on-year and the contracted sales floor area decreased by 49.51% year-on-year.
In the operating data released by Zhengrong Services, as of December 17, 2021, the gross floor area under management reached about 70 million square meters, and the contracted area was about 100 million square meters. As of December 31, 2020, the GFA under management was 41.28 million square meters, and the contracted floor area was 87.4 million square meters.
Thanks to the performance of third-party expansion during the year, Zhengrong Service's GFA under management and contract GFA have grown well.
Coincidentally, in order to cope with the debt crisis, Blu-ray Development sold Blu-ray Gerber Service, and Color Life sold its core asset, Neighborhood Music Shares; on December 16 last year, Jinke Service, a leading enterprise in Southwest China, introduced Boyu Investment at the cost of transferring 22% of its equity and obtained 3.734 billion yuan of working capital.
In addition, there are Evergrande Property, Zhongliang Property, Zhongnan Service, Yuzhou Property, Aoyuan Health, Kaisa Beauty and other property and enterprise resources have been traded or sold at a price.
When the seller's market has an endless stream of good products and companies on display, looking for suitable buyers and promoting high-quality cooperation, it has become a more difficult law in this capital game.
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