In fact, with the introduction of commercial factoring business, many private equity institutions in the early stage used supply chain finance as a financing method to invest the raised funds in listed companies or even general small and medium-sized enterprises to obtain high returns. However, since the second half of 2017, listed companies involved in supply chain finance began to explode, and through cross-border finger supply. Some listed companies in the chain fell into the trap, causing the company to suffer losses, and eventually headed for the road of wearing stars and hats.
China Capital Medical Finance Explosion
On the evening of July 8, Noah Wealth, a US-listed company, announced that its Goffer Assets Credit Fund provided supply chain financing for third-party companies related to Chengxing International Holdings with a total amount of RMB 3.4 billion. Luo Jing, the actual controller of Chengxing International Holdings, was recently detained by the police for suspected fraudulent activities. As a result, Noah Wealths share price fell sharply.
In fact, with the introduction of commercial factoring business, many private equity institutions in the early stage used supply chain finance as a financing method to invest the raised funds in listed companies and even ordinary small and medium-sized enterprises to obtain high returns.
However, since the second half of 2017, the listed companies involved in supply chain finance began to explode, and some listed companies fell into the trap, which made the company suffer losses, and eventually headed for the road of wearing stars and hats. It is worth noting that most of the supply chain financing products invested in SMEs without collateral appear in the form of fixed income products. After these products penetrate, the underlying assets are actually equivalent to a credit loan with a higher risk level.
In the past, the main business of Huaye Capital (now * ST Huaye) was real estate. In 2015, the company implemented de-real estate and introduced new medical financial supply chain business. The operation mode of medical financial supply chain business is to purchase the receivables from suppliers at discount price for financial products such as capital management plan, partnership, trust plan, etc. to provide drugs, equipment and consumables to the third-class hospitals. The third-class hospitals will return the funds according to the original value of the receivables on the due date, so as to realize the investment income. It was precisely this business that caused the company to explode.
On September 25, 2018, Huaye Capital announced that the creditors rights of accounts receivable invested by its subsidiary, Tibet Huashuo Investment Co., Ltd. were overdue, with a total overdue amount of accounts receivable amounting to 888 million yuan. Later, Huaye Capital sent lawyers to the first, second and third affiliated hospitals of the debtors Army Medical University to find out the situation, and then found that the debt agreement was false. In response, the company said: Chongqing Hengyun Pharmaceutical Co., Ltd., an affiliate of the company, is suspected of forging seals and fabricating transactions with hospital accounts receivable creditors rights, which may cause the company to suffer significant asset losses. The announcement shows that at that time, Huaye Capital Medical Finance related business involved in accounts receivable stock of 10.189 billion yuan, all obtained from the transfer of Fang Hengyun Pharmaceutical.
Huaye Capital disclosed its annual report of 2018, exposing huge losses, with a total annual loss of 6.438 billion yuan, which exceeded the companys total revenue in that year. When the annual financial report was issued by the accountant, the companys stock was warned of delisting risk and renamed * ST Huaye. The latest stock price of * ST Huaye is 1 yuan. The stock price of * ST Huaye dropped 69.46% in 2018 and 61.39% in this year.
Nine-Owned Shares Subsidiary Company has been discontinued
The same is true for Nine Owned Shares (now * ST Nine Owned Shares). Nine Owned Shares (now * ST Nine Owned Shares) have been ST since January 15, 2019 due to the loss of effective control over the supply chain of Runtai, an important holding subsidiary. In fact, since the second half of 2018, nine shares have been in trouble. On the evening of January 13 this year, Nine Shares announced that the company lost effective control over Runtais supply chain and could not obtain financial data. Runtais supply chain production and operation business stopped. Nine shareholders had to apply for other risk warning because production and operation activities were seriously affected, and expected to return to normal within three months, the main bank accounts were frozen.
Nine shareholders crossed the border and fell into the trap instead of eating pie. It is known that the Runtai supply chain was acquired by ninety shareholders in August 2017 by cash acquisition. At that time, the 51% equity of Runtai supply chain was acquired by Nine Owners for 158 million yuan. The data show that in 2017, Runtai supply chain realized business income of 1.223 billion yuan and total profit of 31.13 million yuan. Nine-owned shares hold 51% of the companys equity, and its business income accounted for 81% of the companys business income in 2017.
But in the past year alone, the Black Swan Incident has erupted. In September 2018, nine shareholders disclosed for the first time the risks associated with Runtais supply chain, saying that Gao Wei, the legal representative of Runtais supply chain, had not returned from abroad for personal reasons and that Runtais supply chain business was forced to stop completely. Since then, nine shareholders have asked Runtai Supply Chain to provide relevant information without any reply. Gao Wei has also been detained abroad for a long time, unable to perform his duties normally. In November 2018, nine shareholders found that Runtai Supply Chain office space was no longer working, the door was locked and could not be accessed.
In fact, since the first half of 2018, the operation of Runtai supply chain has deteriorated, only realizing the net profit of 3.266 million yuan belonging to the company, which is far from the performance commitment of deducting 45 million yuan of non-net profit for the whole year of 2018 when mergers and acquisitions were made. In addition, as nine shares provide joint and several liability guarantee for bank loans in Runtai supply chain, due to the overdue loan of Runtai supply chain bank, affected by this, nine shares have also been sued by some creditors banks.
Tentative Bankruptcy of Ningbo Dongli Cross-Border Mark
With the completion of mergers and acquisitions, the supply chain of Nianfu has a significant role in improving the companys performance. According to the annual report, Ningbo Dongli achieved revenue of 12.877 billion yuan in 2017, an increase of 23.99.84% over the same period last year; the net profit of shareholders belonging to listed companies was 159 million yuan, an increase of 1277.33% over the same period last year. From August to December 2017, the revenue of the supply chain reached 12.124 billion yuan, which accounted for 94.20% of the consolidated statements of listed companies. The net profit of the supply chain reached 149 million yuan, which accounted for 93.71% of the consolidated statements, and became the main contributor to the profits of Ningbo Dongli in 2017.
However, in 2018, Ningbo Dongli found that the former shareholders of the rich supply chain, such as Rich Holdings and Li Wenguo, were suspected of contract fraud and financial fraud in the process of major asset reorganization, and then reported the case to the public security organs. Two months later, the responsible person of Nianfu Supply Chain was arrested on suspicion of contract fraud, illegal disclosure and non-disclosure of important information. On December 27, 2018, Ningbo Dongli received a civil ruling and decision stating that the court had accepted the bankruptcy liquidation application for the Nianfu supply chain.
Since then, the Annual Rich Supply Chain has no longer been included in the consolidated statements of the company. According to the announcement issued by Ningbo Dongli, the net profit loss of the return home of the rich supply chain in 2018 after deduction of non-profit is 1.726 billion yuan, which is far from the performance commitment of 320 million yuan in that year.
Source: Daily Economic News Responsible Editor: Yang Bin_NF4368