The market level released a new signal: the financing amount of real estate mergers and acquisitions in various channels that are not included in the "three red lines" has exceeded 150 billion yuan. In the past, blind mergers and acquisitions buried hidden dangers for real estate developers, industry fundamentals have not yet recovered, and the expansion of high-credit housing enterprises has been biased towards rationality and caution.
Lack of experience in clarifying complex debt relationships, difficulty in negotiating creditor settlements, and low prices for open market auctions, high-credit state-owned real estate developers will not easily accept mergers and acquisitions. Previously, Lin Zhaoyuan, chairman of Yuexiu Real Estate, said that the key was broken: "Money is not a problem, focus on the quality of the M&A target."
The three main roles of AMC entry
It is not difficult to see from this that at present, it seems that the "wave of mergers and acquisitions" is ready to be launched, but in fact, most of the people in the currency holding institutions are waiting to see, and the "frontline troops" need to enter the field to accurately dismantle the bomb. Under such a pattern, the necessity of AMC entering the market to participate in the debt of housing enterprises is beyond doubt. However, unlike the previous re-disposal of non-performing assets, this time AMC entered the market, focusing on project mergers and acquisitions and related financial intermediary services, which means that the risk asset disposal threshold is moved forward to achieve the following roles:
First, after AMC enters the market, it can inject new funds. Judging from the operation path and past experience in the disposal of non-performing assets, AMC disposes of risk assets in the role of financial advisor, and the process of debt reduction is slow; if it is an investor, because it has little experience in real estate operation, the probability of directly acquiring housing enterprises is small, and the possibility of acquiring housing enterprise debt and risk assets from financial institutions is higher.
In addition to its own funds, the funds required for the acquisition of debt may also need policy support, that is, the issuance of financial bonds by AMC as seen at present, or the joint participation of industrial capital in accordance with the principle of marketization, which has expanded the channels of funds for the real estate industry. With "new grain" in hand, it can speed up the disposal of risk assets.
Second, after the introduction of AMC, it is conducive to stabilizing asset prices. Behind the current real estate "merger and acquisition tide" may be two types of reasons: first, the transaction between housing enterprises, the buyer's right to speak is high, the insurance housing enterprise has a four-fold discount to sell assets, so that the asset price deviates from the fair value, the consequence may be insolvent; second, in the past, some real estate developers used means such as clear shares and real debts to whitewash the statements, resulting in complex relationships between risk assets and creditors, large disputes among multiple creditors, requirements are not uniform, and it is difficult for buyers to coordinate and deal with them.
After the AMC is introduced, it can become a single friendly creditor and speed up the debt process. The creditor-debtor relationship of many real estate projects is complex, and there are large disputes between multiple creditors in the disposal, with different requirements and different degrees of willingness to make concessions, and the process of debt reduction is hindered. The regulatory authorities only look at the desk documents to coordinate, and it is more difficult to split, clarify and deal with complex creditor-debtor relationships. AMC can better straighten out the creditor-debtor relationship by purchasing all the broken creditors, make a complete plan, make more effective debt settlement arrangements, jointly revitalize the project, absorb losses and exit the existing creditors, and cut off the association with the insurance housing enterprises.
After that, AMC can introduce developers to carry out later project construction and better realize the delivery of the building.
Third, after the participation of AMC, it will help accelerate the liquidity of risk projects and ensure stable sales of real estate. AMC has rich experience in disposing of non-performing assets, and after acquiring debt and risk assets, it can integrate various financial resources to inject funds by virtue of its own financial license advantages. Then, look for high-credit housing enterprises or agency construction enterprises to cooperate, so that the unfinished projects of the insurance housing enterprises can complete the follow-up development, and even a variety of formats can be included in the acquisition asset package, cutting off the association with the insurance housing enterprises.
In short, AMC can better coordinate upstream and downstream, buyers and sellers and government resources, accelerate the release of liquidity of projects, ensure delivery, and stabilize residents' confidence in buying houses.
Resolving the risks of the real estate industry is a systematic project, and then the degree of participation of AMC may be deeper, the bank and trust asset protection all have the ability to dispose of, and the issuance of M&A loans by high-credit housing enterprises can also revitalize risk assets. But more importantly, it is necessary to maintain the adaptability of supply-side adjustment and demand-side adjustment, guide real estate funds into a virtuous circle, win time and space for the entire industry to bail out, and let real estate play an active role in stabilizing the macroeconomic market.
There are four major models of AMC debt
Chen Mingli, general manager of China Merchants Ping An, said that according to different situations such as project complexity, it is divided into four models:
Direct debt restructuring
For real estate enterprises with sufficient assets and certain operation and development capabilities, but short-term liquidity problems, AMC can acquire the claims of the problem housing enterprises, reorganize the debt term, guarantee conditions, interest rates, etc., give a certain grace period for repayment, and provide liquidity fund support according to the actual situation of the project, help resume work, and promote the project. Debt restructuring can help the project mitigate risks, so that housing enterprises can exchange time for space and realize the exit of the project.
Introduce strategic investors to carry out restructuring and revitalization
For the project has high-quality land resources, but the debtor's housing enterprise itself has insufficient development capacity and strength, and the inability to develop the project leads to the inability to repay the due, AMC can help revitalize the assets by introducing a strong real estate developer as a strategic investor while restructuring the debt. The debtor can let a part of the project proceeds be given to the strategic investor, the strategic investor to the project escrow, construction, sales, and finally through the revitalization of the project, normal sales to achieve the project exit; if the debtor is willing to directly sell the project in exchange for cash flow to get out of trouble as soon as possible, AMC can assist in finding a suitable acquirer, cooperate with the acquirer to conduct project due diligence, jointly design the transaction structure and revitalization plan, match the conclusion of the transaction, cooperate with the acquirer to acquire and reorganize the debt, provide financial support, etc., Finally, the project is withdrawn through the disposal of assets.
This model can organically combine AMC's capital operation and resource integration capabilities with the developer's development and operation capabilities, and the advantages of both sides complement each other, so as to effectively improve the ability to reorganize and revitalize difficult real estate projects and maximize the value of the project. For developers, under the current situation of "difficult to get land, expensive to get land", by intervening in problem real estate projects, they can obtain high-quality project resources at a lower cost, open up new channels for obtaining land, and obtain better economic benefits.
Enhance the value of distressed properties through renovation and professional operations
If the property has been built, due to mispositioning, poor management and other reasons for liquidity problems, AMC can cooperate with professional institutions to transform the property, or change the use of the property, such as transforming the office building into a hospital, renovating the hotel, etc., plus cooperating with professional operators of various formats to improve the level of operation management, and ultimately realize the empowerment and revitalization of assets.
Participate in the bankruptcy reorganization of troubled housing enterprises
Some housing enterprises due to their own poor management led to the outbreak of debt crisis, various institutions cross-default, creditor-debtor relationship is more complicated, this situation can be promoted through bankruptcy reorganization to promote the debt risk of real estate enterprises to resolve. Under the auspices of the court, creditor's rights and debts can be comprehensively sorted out, and the safety of funds and the progress of promotion are more controllable. AMC can participate in the design of the reorganization plan as a creditor, can also participate in the investment of common benefit debt, and for optimistic projects, it can also participate in the reorganization investment as a strategic investor or financial investor in the bankruptcy reorganization process to achieve investment and loan linkage.
AMC has mostly entered the market to acquire debt and non-performing assets
Asset-light or asset-heavy? The asset-light model refers to the fact that AMC helps non-performing assets find buyers, contributes professional skills, knowledge and customer resource networks as intermediaries (financial advisors, etc.), and does not contribute or contributes less money themselves. However, in the context of weak market-wide risk appetite and the participation of other institutions, such an "asset-light" participation model is helpful to the debt reduction process, but the contribution of substantial acceleration of debt reduction may be limited. The market is more concerned about its asset-heavy participation model, that is, it really takes out funds to participate in the debt resolution of real estate enterprises.
Acquisition of debt or acquisition of real estate? In the asset-heavy model, AMC has roughly two directions to choose from.
The first is to acquire the debt and non-performing assets of housing enterprises from financial institutions, which has a greater probability. After AMC acquires the debt, it can inject funds, or find other developers to cooperate in selling the project under construction or construction on behalf of the company, and match the unfinished projects of the insured housing enterprises with funds and complete the follow-up development as much as possible to achieve the delivery of the building. If there is no net cash flow return for a single project, then it may have to be combined with other assets so that AMC has room to participate.
The second is to directly participate in the acquisition of housing enterprises, and the probability is relatively small. The main reason is that AMC itself has less experience in real estate operations, although some of AMC has real estate business, but direct participation in the acquisition of national real estate enterprises needs to face a series of new compliance and operational issues, which is more difficult.
Three major problems need to be solved urgently
AMC faces several real-world issues of concern in its involvement in debt resolution:
First, who bears the asset impairment loss. In the process of AMC's participation in debt, after the asset value is re-evaluated, the sharing of impairment losses needs to coordinate the joint discussion and balance of interests of all creditors and debtors.
Second, whether the newly injected funds will be used preferentially to protect the handover. If AMC buys the non-performing asset package of the financial institution, buys out the creditor's rights, and the existing creditors withdraw after absorbing the loss and obtains liquidity, then the newly injected liquidity is not directly used to guarantee the delivery of the property, but is used to suspend the repayment pressure of the real estate enterprise on specific debts, which is an indirect liquidity support.
Third, the order in which the AMC is compensated. AMC's funds are late entrants, after the insurance real estate enterprise has cash returns, if there are other creditors, AMC and other creditors should obtain cash flow in what order, may be based on business logic, legal provisions, political and social considerations for comprehensive confirmation.
Where does AMC's money come from?
Without other policy support, the amount of acceptance, cost and capital adequacy requirements, the resources that non-performing asset managers themselves can mobilize are relatively limited. Considering that AMC is facing both liquidity and capital constraints, and Huarong, which ranks second in terms of asset size, has just completed its restructuring, it is unlikely that AMC will rely on its own capabilities to achieve a significant expansion of the acquisition business. At the same time, the average cost of liabilities of AMC is about 4%, there are requirements for profitability, and the full weight of capital risk of acquired non-performing assets is difficult to reduce, and there are also requirements for capital adequacy ratio. Whether there is policy support in the future, such as refinancing, etc., to help AMC expand its volume and reduce costs in resolving real estate bonds is worth paying attention to.
Source: Non-performing asset management