Producer: Sina Finance Listed Company Research Institute
Text/Something to go by
In recent years, in the context of the normalization of registration-based delisting and related policy support, listed companies in financial difficulties are taking bankruptcy reorganization as a fresh channel for risk.
According to the data, as of December 31, 2023, there have been 118 listed companies in mainland China that have been approved by the court to approve the reorganization plan, of which 64 have been since 2019, accounting for 54.24%, more than half. It should be pointed out that in the bankruptcy and reorganization cases of A-share listed companies, ST companies are the majority. According to incomplete statistics, 15 companies that were approved by the court in 2023, including *ST Jinglan, *ST Zhengbang, and *ST Doushen, have all completed the implementation of the plan.
It is worth noting that *ST Guangtian seems to be about to get out of the predicament and reverse the trend of reorganization, and is about to successfully take off the hat. It should be pointed out that due to *ST Guangtian's stepping on Lei Evergrande, the company not only suffered huge losses, but also had slow turnover of accounts receivable and intensified liquidity pressure, which made the company close to the verge of delisting.
Will the hat be taken off by means of reorganization?
Recently, *ST Guangtian applied for the withdrawal of the delisting risk alert and other risk alerts.
Due to the negative audited net assets at the end of the period in 2022, the company's stock trading has been put on delisting risk alert by the Shenzhen Stock Exchange at the end of April 2022, and the company's shares have been subject to other risk alerts since July 12, 2022 due to the freezing of the company's main bank accounts. In 2022, the net profit before and after deducting non-recurring gains and losses in the three fiscal years of 2022 was negative, and the 2022 annual audit report showed that there was uncertainty in the company's ability to continue operations, and the company's stock trading was once again superimposed by the Shenzhen Stock Exchange in 2023 to implement other risk warnings.
It is worth noting that the company successfully secured the shell through reorganization. On May 30, 2022, the Company was applied for reorganization by creditors and applied for the initiation of pre-reorganization, on January 6, 2023, the Shenzhen Intermediate People's Court decided to initiate the pre-reorganization, on July 24, 2023, the Shenzhen Intermediate People's Court ruled to accept the reorganization, on November 28, 2023, the Shenzhen Intermediate People's Court ruled to approve the reorganization plan, and on December 22, 2023, the Shenzhen Intermediate People's Court ruled to confirm the completion of the implementation of the reorganization plan.
After the reorganization, the company realized the divestment of non-reserved assets unrelated to its main business, reducing the historical burden. After auditing, the company's judicial reorganization income in 2023 has been recognized as high as 4.608 billion yuan, and the net assets attributable to shareholders of listed companies at the end of 2023 are 776 million yuan, and the company's asset-liability ratio has decreased from 146.63% at the beginning of 2023 to 67.66%, and the company's financial position has been greatly improved.
At the end of the 2023 reporting period, the company achieved operating income of 1.002 billion yuan in 2023, net profit attributable to shareholders of listed companies of 2.127 billion yuan, net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses of -1.995 billion yuan, and net assets attributable to shareholders of listed companies of 776 million yuan.
According to Rule 9.3.7 of the Stock Listing Rules, "if a listed company is subject to a delisting risk alert for its stock trading due to the circumstances set forth in subparagraphs (1) to (3) of paragraph 1 of Article 9.3.1 of these Rules, and the annual report of the first financial year indicates that the company meets the conditions of not any of the circumstances under subparagraphs (1) to (4) of paragraph 1 of Article 9.3.11 of these Rules, the company may apply to the Exchange for the cancellation of the delisting risk alert for its stock trading." ". In 2023, the company's audited net profit is positive and the operating income is not less than 100 million yuan, the audited net assets at the end of the period are positive, and the audit report of Zhonghua Zhonghuan issued a standard unqualified opinion on the company in 2023.
According to the self-examination of the relevant provisions of the "Stock Listing Rules", the company said that there are no other situations where the delisting risk warning has been implemented. The company will apply to the Shenzhen Stock Exchange to revoke the "delisting risk warning" for the company's stock trading.
In addition, the company's bank account freeze and other risk warning factors that are identified as doubtful as a going concern are also improving.
On the one hand, on December 22, 2023, the Company received the Civil Ruling from the Shenzhen Intermediate People's Court, which confirmed the completion of the implementation of the Company's reorganization plan. According to Article 94 of the Enterprise Bankruptcy Law, "the debtor shall no longer be liable for repayment of the debts reduced or reduced in accordance with the reorganization plan from the completion of the implementation of the reorganization plan", so the litigation debts involved in the freezing of the company's accounts have been repaid through the reorganization plan, and there is no legal obstacle to the unfreezing of the remaining frozen accounts, and the company will expedite the application to the relevant courts to unfreeze the remaining bank accounts.
On the other hand, on April 25, 2024, Zhongshen Zhonghuan issued a standard unqualified "Audit Report" for the company's 2023 annual financial report, and since 2024, the company has resumed the bidding qualification and A+ ranking of the Shenzhen Public Works Department, and has now won the bid for the fine decoration project of Xiaomeisha Seaside Park, the comprehensive building project of Jindongzhen Liquor Manor, the curtain wall project of the comprehensive supporting housing project in front of Shenzhen Airport T3 station, and the fine decoration project of the Party School in Pingshan District, etc., and the business undertaking has been smoothly promoted. In addition, through the implementation of the reorganization plan, the company has introduced 1 reorganization industry investor and 4 reorganization financial investors, and the controlling shareholder has been changed to a state-owned enterprise with strong strength, and a total of 1.414 billion yuan of reorganization investment has been received from investors. The company's asset-liability structure has been fundamentally improved, net assets have turned positive, and the company's operating and financial conditions have been significantly improved.
How to deal with the difficulties in SPV architecture design?
It is worth noting that behind the successful restructuring of *ST Guangtian, it may benefit from the ingenious design of related solutions. This time, in order to efficiently promote the reorganization, *ST Guangtian adopted the SPV structure to separate the "incurable" assets.
During the implementation of the reorganization plan, Grandland Group will set up a new operating platform company registered in Shenzhen as the legal entity to hold, manage and dispose of non-reserved assets under the trust, and after the establishment of Grandland Group and the transfer of non-reserved assets (excluding monetary funds) to the operating platform company, Grandland Group will take all its claims and 100% equity in the operating platform company as trust property and deliver it to the trust plan. The non-retained assets (excluding monetary funds) of Grandland Group determined in accordance with this reorganization plan are the underlying assets of the trust plan.
As of the date of acceptance of the reorganization, the monetary funds in the bank account of Grandland Group will be used to pay off various claims. In addition to the above-mentioned retained assets and monetary funds, the remaining assets are divested as non-reserved assets and undertaken by the trust plan, and no longer belong to the scope of assets under the name of the listed company. According to the announcement, the book amount of assets divested by the company exceeded 14 billion yuan, and the market appraisal value exceeded 5.6 billion yuan.
Source: Announcement
Why is the SPV architecture adopted, and what are the advantages of such a scheme design?
First, from the perspective of the company's divestment of assets, the balance of book funds is huge, the relevant entities have a long duration of existence, complex legal relationships, and a large amount of claims and debts, etc., and it takes sufficient time and a lot of manpower and capital costs to sort out and solve them comprehensively. In addition, the composition of some non-reserved assets is complex, and it is difficult to dispose of them at present, so it is not feasible to dispose of them in the short term, which may affect the final implementation of the reorganization plan in the future.
Second, the company's non-retained assets are mainly its accounts receivable to the employer, in view of the industry characteristics of the engineering business, the recovery of these accounts receivable should be promoted in combination with the actual situation of the specific project, and the value realization method and realization results of other types of assets should also be analyzed in accordance with their respective characteristics.
Third, from the perspective of the needs of all parties, it is often difficult for investors to have the ability or willingness to invest in all the restructured assets, and investors generally do not want to acquire all assets, but want to divest some non-core assets to avoid the risk transmission of non-core assets. For the bankruptcy administrator, the disposal of the assets of the bankrupt subject is limited by the statute of limitations for the overall bankruptcy reorganization, and if the non-core assets cannot be properly disposed of, the time process of the entire bankruptcy reorganization will be slowed down; for creditors, the hasty disposal of non-core assets may lead to serious depreciation of the value of the assets, and it will be difficult to maximize benefits.
Finally, investors need to be reminded that there is no relevant asset injection plan for the reorganization of *ST Guangtian, but will continue to retain high-quality assets related to the main business, divest the existing civil engineering, engineering financial services and other businesses, further improve the professional, intensive and large-scale level of the building decoration sector, and strengthen the ability to undertake large-scale building decoration projects. Therefore, although the risk of the company's delisting may be cleared, whether the future operation will improve or not needs to be further monitored. It should be pointed out that the company's performance revenue in the first quarter was cut in half, and the loss narrowed to a certain extent. According to the report for the first quarter of 2024, the company's operating income was 73.4299 million yuan, a year-on-year decrease of 51.16%, and the net loss attributable to shareholders of listed companies was 59.945 million yuan, narrowing the loss.