Red Magazine Finance Hui Kai
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In September this year, the 17 Sanding 01 bonds issued by Sanding Holdings defaulted. Some bondholders told the "Red Weekly" reporter that when sanding holding bonds were first issued, they adopted a structured issuance and cross-holding method, and Sanding Holdings invested about 530 million yuan, and now it cannot be recovered. The underwriter of The Sanding Bonds was Guorong Securities, and many bondholders admitted that Guorong Securities' performance before and after the default of the Sanding Bonds was not due diligence, and did not supervise the issuer to handle the credit enhancement procedures in advance, and afterwards it was passive to the holders.
Wind shows that since 2019, default events in the bond market are still frequent, and the scale of default has reached 117.9 billion yuan, and the number of defaulted bonds has only exceeded that of 2018. Among the defaulting entities, private enterprises are still the hardest hit areas, especially in Jiangsu, Zhejiang, Shandong and other regions. As of mid-November this year, Jiangsu and Zhejiang were in the top five of the number of defaulted bonds.
For the frequent default events in the bond market, Red Weekly has previously published many articles such as "Shin Kong Debt Crisis" and "Yinyi Debt Crisis" to report. Today, the latest credit risk event for private enterprises in Zhejiang Province is Sanding Holding Group Co., Ltd. (hereinafter referred to as "Sanding Holdings"), whose 17 Sanding 01 bonds issued by it defaulted in September this year.
Sanding tens of billions of debt crisis
Sanding Holdings is located in Yiwu, Zhejiang Province, the group was founded in 1994 by Ding Zhimin, Ding Ermin, Ding Junmin three brothers, officially established in 2003. Wind shows that Sanding Holdings owns two sub-groups and 14 subsidiaries of Huading Nylon Co., Ltd. (601113.sh) and Sanding Webbing, and has multiple business departments and project departments such as investment and capital operation division, financial industry division and real estate division, involving five major fields such as webbing, nylon, real estate industry (including hotels and operating properties), chemical industry and venture capital. According to the financial report, as of the end of 2018, Sanding Holdings had total assets of 23.338 billion yuan, total debt of 10.554 billion yuan, and net profit of less than 500 million yuan.
The bond crisis of Sanding Holdings has already appeared in early 2019. A holder of the 17 Sanding 01 bond told reporters that at the beginning of the year, the bond issuer hoped that the bond holding institution could extend, but due to the liquidity needs of some institutions, many sell orders were listed on the Shanghai Stock Exchange in January, which directly led to fierce fluctuations in the price of the relevant bonds and triggered the suspension mechanism. It is reasonable to say that the issuer needed to truthfully announce the true situation of the debt repayment funds at that time and apply for suspension of trading, but in fact, the issuer issued an announcement on January 14 saying that the company's operating cash flow and realizable assets were sufficient, and the credit line of the financial institution still had a balance of 1.9 billion yuan, emphasizing that the debt repayment funds were guaranteed.
At the end of July, 17 Sanding 01 entered the resale registration period, and the balance of 344 million yuan was almost all resold, and it was officially implemented in early September. On September 6, Sanding Holdings announced that it could not redeem the resale funds and interest on time. At this time, the Sanding debt crisis was officially made public, and st Huading's stock price plummeted, from about 6 yuan at that time to near 3 yuan.
According to the 2018 annual report of Sanding Holdings, as of the end of 2018, the total amount of credit granted by the bank to Sanding was nearly 5.4 billion yuan. Specifically, the Credit Granting by the Industrial and Commercial Bank of China is nearly 900 million yuan, the Agricultural Bank of China is 700 million yuan, and the Bank of China is granting 630 million yuan. In terms of equity pledge, public information shows that shareholders of a number of listed companies, including Sanding Holdings, have also pledged their st Huading shares to Guosen Securities, Orient Securities, Changan Trust and other institutions.
What to do with this part of the stock? Changan Trust replied to the "Red Weekly" reporter that the above pledge belongs to the transaction management trust business, and the company will handle it according to the opinions of the settlor.
"Red Weekly" reporter learned from the relevant bondholders that there are several large private placements such as Shenzhen Zhengqian Financial Services, Shanghai Yinye Investment, etc. also hold a lot of Sanding bonds, and the above two private placements also appear in the creditor list of some other defaulted bonds, for example, Zhengqian Financial Services holds a total of about 130 million yuan of Hongye bonds in multiple accounts, and Yinye Investment declares about 140 million yuan of debt to Xinguang Holdings.
In addition to private placement, the trust plan also "stepped on the thunder" of the Sanding debt crisis. "Red Weekly" reporter learned that China Overseas Trust issued the Tianshuang No. 3 Collective Trust Plan in November 2017, and the establishment time was roughly the same as the issuance time of 17 Sanding 01~04. According to the official website of China Overseas Trust, the net value of Tianshuang No. 3 has fallen since December 2018 and has now fallen to less than 0.72 yuan, and its trend coincides with the volatility of Sanding Bonds.
Structured distribution is self-inflicted
17 Sanding 01~04 is a corporate bond issued to qualified investors, but after the default of Sanding Bonds in September, the issuer announced that the four bonds of 17 Sanding 01/02/03/04 will be "only transferred on the integrated electronic platform of fixed income securities of the Shanghai Stock Exchange", and the letter will be transferred to the exchange's private debt credit platform. In mid-September, the Shanghai Stock Exchange announced that Sanding Holdings had not fulfilled its obligations in accordance with the corporate bond raising measures, and decided to suspend the listing of 17 Sanding 01. Bondholders bluntly said, "Sanding Bonds have been made into private bonds by issuers and securities companies, and the information has not been publicly disclosed."
17 Sanding 01 ~ 04 is a small public bond, the investment threshold is high, some creditors told the "Red Weekly" reporter, Sanding Holdings adopted a structured bond issuance method, there are few liquid chips, before the beginning of 2019, few individual investors bought the bond. "It was later learned that in January this year, securities companies and issuers had already disclosed the fact that funds were tight to some institutions, and hoped that the holding institutions would not sell back." Ms. Chen (pseudonym) said that in January this year, Sanding bonds had already plummeted. In July, the issuer again convened a meeting of institutions, "in fact, it was dissuaded", but the dissuasion failed, the bond fell again, and then Sanding announced that it used two of its hotels as a credit enhancement measure, "After seeing the credit enhancement, we bought a little Sanding bonds on the eve of the resale at the end of July". On August 6, Sanding held a meeting again, and the leaders of Yiwu City also attended, saying that the abundant funds would not default, but soon the debtors received a call to withdraw, hoping not to sell back, "We quickly called The Chairman of Sanding Ding Zhimin, the financial director Liu Dongmei, etc. The financial director also said that the holders below 5 million yuan would guarantee the payment of interest." However, at the end of August, Huading shares suddenly announced that the self-inspection found that the major shareholder Sanding Holdings occupied nearly 600 million yuan of the listed company's funds, and for this purpose, the two hotels originally mortgaged to the bonds were used to mortgage the listed company.
"Sanding Holdings is suspected of falsifying the letter." Some debtors said that at this time, they realized that the default of Sanding was almost a nail in the coffin. Some holders close to the top management of Sanding told the "Red Weekly" reporter that there were three top management complaints that Sanding Holdings advanced about 530 million yuan in the process of structured bond issuance, and the current bond default, the 500 million yuan can not be recovered.
Underwriter Guorong Securities was accused of failing to exercise due diligence
The lead underwriter of Sanding Bonds is Guorong Securities. Wind shows that in 2018, Guorong Securities achieved a total revenue of 864 million yuan and a net profit of nearly 12 million yuan, ranking 75th in the industry. In terms of bond business, Guorong Securities ranked about 30 in terms of bond underwriting scale in 2017, and the Huading bonds it underwritten have defaulted. The "Red Weekly" reporter also noted that Guorong Securities is also the main underwriter of many bonds of Dongxu Group. Since 2018, Dongxu Group has been mired in rumors of tight cash flow several times, and S&P has downgraded Dongxu's long-term entity credit rating, and its bonds have also defaulted recently.
According to the data, since 2018, Guorong Securities has been punished by regulators for many problems in the fixed income business, such as at the end of 2018, the asset management department of Guorong Securities was punished by the Inner Mongolia Securities Regulatory Bureau for the lack of valuation and credit problems in the trading process of Yongtai Bonds, as well as the business process of investment banks; in February this year, the CSRC issued a warning letter to Li Mou, head of the fixed income division of Guorong Securities; in May this year, the CSRC announced a penalty announcement for Guorong Securities and senior executives of the asset management department. In addition, Guorong Securities has adopted administrative supervision measures to restrict the self-operated business of bonds for 6 months and suspend the filing of asset management products for one year.
Before the default of the Sanding bonds, the issuer Sanding Holdings proposed to use the property rights of its Yiwu Marriott Hotel as a credit enhancement collateral, and the underwriter Guorong Securities acted as the mortgagee on behalf of the bondholders. However, at the end of August, Huading Shares, a listed company under Sanding, said after self-inspection that it found that the issuer, as the major shareholder, had occupied 600 million yuan of the listed company's funds, so it had mortgaged assets such as Yiwu Marriott Hotel to the listed company.
"We found out at this time that the issuer should not have mortgaged the bonds", a bondholder said, "Guorong Securities did not urge the issuer to go through the mortgage procedures, resulting in the issuer transferring collateral, there is a suspicion of dereliction of duty".
For the performance of Guorong Securities after the default of Sanding Bonds, many holders, including Ms. Chen and others, expressed dissatisfaction. "Recently, we have called Guorong Securities many times, and the other party's reply is very delayed." She pointed out that the holders hoped that Guorong Securities could provide the holder information in order to take litigation measures, but Guorong Securities remained silent.
In this regard, Guorong Securities replied to the "Red Weekly" reporter that it has repeatedly urged Sanding Holdings to fulfill the resolutions of the bondholders' meeting, requiring Sanding Holdings to formulate and implement debt repayment plans and risk disposal plans, and provide external guarantee details and related asset details. In mid-October, Guorong Securities filed an arbitration application with the Beijing Arbitration Commission, requesting an arbitral award to Sanding Holdings to pay the principal and interest of the bonds. At present, Guorong Securities is promoting arbitration, property preservation and other matters in an orderly manner to properly handle and assist in resolving the default risk of this bond and safeguarding the interests of holders.
Two large private enterprises in Yiwu are lying down, diversified investment into a "curse"
Before Sanding, another large local private enterprise, Sunbeam Holdings, had already defaulted. "Two large private enterprises in Yiwu, Zhejiang Province, Sunbeam Holdings and Sanding Holdings, have defaulted on their bonds one after another, and there are factors of consistency behind them." Some bondholders analyzed to the "Red Weekly" reporter that Sanding Holdings has carried out rapid diversification in recent years, but with the outbreak of the debt crisis, many of the projects in which it has participated have appeared at risk of bad end. For example, in July 2018, Sanding Holdings and Pingdingshan Municipal Government signed a caprolactam integration project contract with a total investment of 20 billion yuan; in August this year, Sanding signed a strategic cooperation ceremony with the Ningxia Ningdong Energy and Chemical Fund Management Committee, and the total investment of the project was also 20 billion yuan. Both projects now have a bleak future.
Sanding is also involved in real estate development, which, like Sunbeam Holdings, is "invariably" involved in the high-end hotel business: Sanding has luxury hotel assets such as Yiwu Marriott Hotel, and Sunbeam Holdings has the right to operate Kempinski Hotel Shanghai. Now that both companies have erupted into a debt crisis, the above assets are likely to be used to liquidate and repay debts. For example, the "Red Weekly" reporter learned that a news has recently circulated in shanghai real estate circles: Sunbeam Holdings is negotiating to transfer its kempinski hotel operation rights located near the Oriental Pearl Tower in Shanghai.
After The signs of debt risk appeared in Sanding, the local government in Zhejiang also tried to bail out. In January this year, Zhejiang State-owned Capital Operation Co., Ltd. said that Sanding Holdings, the controlling shareholder of Huading Shares, will transfer 300 million yuan of shares to Zhejiang Xinxing Power Partnership (Limited Partnership) with a state-owned background, and the transfer price will not be higher than 7 yuan, which is the first business completed by Zhejiang New Power Fund to alleviate the debt pressure of enterprises. In addition, Yiwu Financial Holdings Co., Ltd. also became the second largest shareholder of Huading shares in the first quarter. However, with the release of Huading shares, the stock price continued to fall, and the market value of the equity held by Zhejiang Xinxing Power Partnership (Limited Partnership) has now appeared "waist cut".
Is there still room for the Sanding debt crisis to be resolved? In this regard, some bondholders informed the "Red Weekly" reporter that the actual controller of Sanding Holdings has repeatedly said since the beginning of September that it will find a way to convert hundreds of acres of industrial land into commercial land, which can be used to repay debts after realization, but it will take several years. In the view of bondholders, bonds cannot be traded now, and holders cannot retreat, so even if they are discounted, they hope that they can be restructured as soon as possible to get an exit opportunity.
For the follow-up disposal of the Debt Crisis of Sanding, the reporter of Red Weekly called Ms. Liu, the financial director of Sanding, and her reply to the reporter of Red Weekly said that it was not convenient to accept an interview.
(This article was published in Red Weekly on November 23)