Ten billion trust thunder? Deep Vortex of Guarantee Fermentation of Nanjing Construction Debt Crisis

category:Finance
 Ten billion trust thunder? Deep Vortex of Guarantee Fermentation of Nanjing Construction Debt Crisis


Successive defaults on bonds

In the announcement of August 6, Nanjing Construction Industry Group said that the company was actively raising debt repayment funds to complete payment as soon as possible. Failure to repay maturing corporate bonds on time will lead to further deterioration of the corporate financing environment, which will adversely affect the companys operation, financial situation and solvency.

According to the Economic Observer, up to now, there have been six default bonds under the name of Nanjing Construction Industry Group, involving a bond balance of 4.6 billion yuan.

A few days ago, the 17Fengsheng 01 of Nanjing Construction Industry Group failed to pay the full interest of 78766 million yuan on schedule. Looking ahead, on July 19, the G17 Fengsheng 1 of Nanjing construction industry failed to pay the principal and interest in full and on schedule, totalling 2.15 billion yuan, and the 18Fengsheng 01 failed to pay the interest on schedule totalling 37.5 million yuan. Prior to this, 17 Fengsheng 02 has also been exposed as a substantive default.

According to Wind data, Nanjing Construction Industry Group currently has a debt balance of 8.5 billion yuan, involving 11 bonds. Among them, there are 5 in one year, totaling 4.1 billion yuan, 6 in 1-3 years, totaling 4.4 billion yuan, and 10 bonds in one year, with a balance of 8 billion yuan, 1 in 1-3 years and a balance of 500 million yuan. It is also reported that 9 of its 11 stock bonds are related to the early maturity clause, totaling 6 billion yuan.

Ten Billion Trust Trample on Mines

The crisis began at the end of 2018, when the Nanjing Construction Industry Group was also Fengsheng Group. The company had issued a notice about the failure to pay off the debts due, involving a total of 1.278 billion yuan of outstanding debts. Later, it was alleged that with the help of government coordination, the company had solved the debt crisis of nearly 1.3 billion yuan in just three days.

Although the three-day crisis soon subsided, its crisis did not disappear.

Three months later, on March 20, 2019, Nanjing Hi-Tech Co., Ltd. (hereinafter referred to as Nanjing Hi-Tech) announced that Nanjing Construction Industry Group and its Nanjing Eastern Road and Bridge Engineering Co., Ltd. (hereinafter referred to as Nanjing Eastern Road and Bridge) had applied accumulatively to Changan International Trust Co., Ltd. (hereinafter referred to as Changan Trust). Request a trust loan of 2.85 billion yuan, by Nanjing Hi-Tech shareholder Nanjing Xingang Development Corporation (hereinafter referred to as Nanjing Xingang) to provide joint and several liability guarantee.

Due to the failure of Nanjing East Road and Bridge and Nanjing Construction Industry Group to cash interest as agreed, Changan Trust applied for property preservation before litigation. On March 12, 2019, according to the ruling of Shaanxi Provincial Higher Peoples Court, about 166 million yuan in bank deposits under the name of Nanjing Xingang and nearly 250 million shares of Nanjing Gaoke were frozen.

According to the Economic Observer, China Finance International Trust will expire in June 2019, China Construction Investment Trust will expire in October 2019, China Everbright Trust will expire in April 2020, China Construction Investment Trust will expire in June 2019, China Construction Investment Trust will expire in October 2019, China Everbright Trust will expire in April 2020, and CITIC Trust will expire in August 2020. The main financing bodies are Nanjing Fengsheng Group and its subsidiary Nanjing Construction Industry Group Co., Ltd., Nanjing East Road and Bridge, Nanjing Xingzhi Construction Investment Co., Ltd., and Nanjing Jiangbei New Energy Development and Management Co., Ltd.

Following Changan Trust, China Finance Trust trampling on thunder Nanjing Construction Industry Group has also surfaced for 1 billion yuan.

In April, Nanjing Hi-Tech announced that the companys controlling shareholder, Nanjing Xingang, held 130314657 shares of the companys unlimited circulation shares, which were frozen by the judiciary. It is understood that the result of the judgment is to freeze the bank deposits of the respondents Nanjing Construction Industry Group Co., Ltd., Nanjing Xingang, Nanjing Construction Industry Group and Zhu Chengsheng at 1024449315.07 yuan. If the balance of deposits is insufficient, other assets with the same value under their names will be seized.

Up to the time of submission, the journalists have not received any reply to their telephone inquiries about the above trust companies.

Feng Jiaqing, deputy director of the trust Professional Committee of Shanghai Lawyers Association, said in the economic observation report that from the perspective of the trust industry as a whole, there is indeed a phenomenon of concentrating on trampling on thunder. Some trust companies have some commonalities in risk preference and the choice of subject matter, which leads to the concentration of funds to some enterprises. In addition, from the perspective of compliance and wind control of trust companies, there are limited ways to verify and retrieve the financing subjects, and it is impossible to fully understand the lending situation of an enterprise.

Reporters consulted Tian Eye Check found that in the column of legal proceedings concerning Nanjing Construction Industry Group, on August 7, China Construction Investment Trust and Nanjing Construction Industry Group, Nanjing Jiasheng Real Estate Development Co., Ltd. financial loan contract disputes were disclosed. Hangzhou Xihu District Peoples Court filed a case on March 20, but the plaintiff China Construction Investment Trust also filed a case. An application for withdrawal was filed on 27 May. Coincidentally, in addition to the list of the above-mentioned trust companies, another Zhejiang merchant Jinhui Trust has also sued Nanjing Construction Industry Group for contract disputes. The ruling shows that the Hangzhou Intermediate Peoples Court filed a case on March 7. However, because the plaintiffs Zhejiang Merchants Jinhui Trust failed to pay the case acceptance fee in advance, the case was eventually withdrawn for prosecution.

Guarantee Vortex

In addition to the above amount of bond default and trust funds, Nanjing Construction Industry Group may borrow more than that from financial institutions.

Founder East Asia Capital website shows that Pengxin 5 was established on November 14, 2017, with a scheduled period of 24 months. By mid-June, the private equity fund has raised a total amount of 122.8 million yuan. The purpose of the fund is to issue trust loans to Nanjing Construction Group Co., Ltd. through a single trust plan, and the funds are ultimately used to make up for it. Provide liquidity for Nanjing construction projects.

In addition, Nanjing High Tech announced on April 30 that about 430 million shares of listed companies held by its controlling shareholder, Nanjing Xingang, were frozen on a waiting basis. The 50 million shares were frozen because of the dispute between Chongqing Suning Microfinance Co., Ltd. and Nanjing Yanzijie Guaranteed Housing Development Co., Ltd., Nanjing Xingang, Nanjing Construction Industry Group and Nanjing Construction Industry Group Co., Ltd. by Shanghai Higher Peoples Court, involving more than 500 million yuan.

According to the July report of Huachuang Securities, on December 30, 2015, the main rating of Nanjing Construction Industry Group was AA. On March 13, 2019, the main rating of Nanjing Construction Industry Group was downgraded to A, BBB on March 27, BB+on April 17 and C on June 19. Three reasons for breach of contract have been analyzed in the research papers: PPP is the main business of the group, with a long period of capital occupation and slow repayment; blind M&A expansion and deleveraging trigger liquidity crisis; a high proportion of external guarantees and frequent capital exchanges, among which the guarantee for Sansan Tzu Group and Xinguang Holdings Group is aggravated by the two defaults. Corporate refinancing is difficult.

The research team of China National Debt Credit Construction Industry believes that since 2018, the policy of de-leverage and risk prevention has led to a tight financing environment. Nanjing Construction Industry Groups long-term dependence on external rolling financing channels has been blocked, and the financial pressure has become prominent, or is the main reason for the companys default. In a deeper sense, the core reason for breach of contract is that the scale of enterprises outward investment exceeds its own bearing capacity. At the same time, frequent transactions and increased risk of capital control further aggravate financial risk. In the announcement issued in mid-June, Founder East Asia Capital said that in March 2019, Nanjing Construction Industry Group and a number of financial institutions have substantive defaults, and understand that it is restructuring. In order to ensure the safety of debt repayment, our company immediately communicated with Nanjing Construction Engineering on the maturity of the private equity fund many times, demanding further clarification of repayment arrangements and commitment to repayment on time, as well as timely announcement of restructuring progress. In Feng Jiaqings view, the governments intervention does not mean that it will be properly handled. It is life or death. In the end, it may be chosen by market. Source: Responsible Editor of Economic Observer: Yang Qian_NF4425

The research team of China National Debt Credit Construction Industry believes that since 2018, the policy of de-leverage and risk prevention has led to a tight financing environment. Nanjing Construction Industry Groups long-term dependence on external rolling financing channels has been blocked, and the financial pressure has become prominent, or is the main reason for the companys default. In a deeper sense, the core reason for breach of contract is that the scale of enterprises outward investment exceeds its own bearing capacity. At the same time, frequent transactions and increased risk of capital control further aggravate financial risk.

In the announcement issued in mid-June, Founder East Asia Capital said that in March 2019, Nanjing Construction Industry Group and a number of financial institutions have substantive defaults, and understand that it is restructuring. In order to ensure the safety of debt repayment, our company immediately communicated with Nanjing Construction Engineering on the maturity of the private equity fund many times, demanding further clarification of repayment arrangements and commitment to repayment on time, as well as timely announcement of restructuring progress.

In Feng Jiaqings view, the governments intervention does not mean that it will be properly handled. It is life or death. In the end, it may be chosen by market.