In fact, since 2018, Sanding Groups public outward investment has continued; its book money funds have a certain scale, and the eventual bizarre default aggravates the holdersdoubts about its financial quality; before Sanding Group default, its commitment to additional mortgage guarantee for bondholders of two Hotel assets, but Huading shares (601113.SH), which were accidentally offset to Sanding Group Holdings, also shocked bondholders.
With the fermentation of the incident, many strange internal affairs surrounding Sanding Groups default are also quietly floating.
2 Billion Cash Suspicion
On the evening of September 6, 344 million yuan of 17 Sanding 01 failed to pay interest and principal to trigger default on the expiration date of the resale.
Wind data shows that Sanding Group is a multi-field, cross-industry private enterprise in Yiwu. It has many subsidiaries engaged in finance, real estate, hotel, ribbon, nylon and other business. The actual controllers are Ding Ermin, Ding Zhimin and Ding Junmin. The company is also the controlling shareholder of Huading stock in A-share company.
The bonds that triggered default had a balance of 344 million yuan and a coupon interest rate of 7.5%. In addition, the bonds that triggered default will be sold back to maturity this year, totaling 2 billion yuan. The main underwriters are all national financial securities.
As for the default, Sanding Group said, Due to the macro-leverage reduction, bank credit contraction, financing difficulties of private enterprises and other factors, our company liquidity problems, debt-paying pressure, resulting in the company failed to repay Sanding Holding Group Limited in 2017 for qualified investors to publicly issue companies. The principal and interest recovered from bonds (first issue).
However, from the financial information disclosed by Sanding Group, the occurrence of this default is quite strange.
At the same time, the company has 8.472 billion yuan of current assets and 1.888 billion yuan of unused credit balance, as well as the Tianfuyuan Real Estate Project, which is expected to sell up to 1.5 billion yuan in advance, all of which are regarded by Sanding Group as the source of guaranteeing the above bond payment.
The above information also makes Sanding Groups explanation of the default unacceptable to bondholders.
According to a recording of a telephone conversation between bondholders and Liu Dongmei, Liu Dongmei said that he could guarantee the payment of holders under 5 million yuan, and a financing officer of Sanding Group also said that he could pay interest. However, the default eventually happened.
In the previous communication (issuer) said that at least the payment of interest is not a problem, we wait for the sale back, otherwise it was sold in the secondary market, the result is still a default on the sale back. Liu Ming said.
Liu Ming said that the local financial office had participated in the bond payment communication. According to the chat records obtained by 21st century economic reporters, Liu Dongmeis speech when communicating with bondholders on the issue of bond payment was waiting for the governments decision-making.
In fact, on September 3, three days before Sandings default, the joint ratings placed it on the watch list and dropped it from AA to A.
Eventually, the bond defaulted. Judging from the joint rating score, it still failed to respond to the issuers credit situation in a timely manner. It was only three days before the default occurred that the bond entered the watch list and was downgraded. A public offering trader said.
The failure of early warning information has to cause the debt market to worry about the financial quality of Sanding Group.
Among the details surrounding the issue of Sanding debt default, the most puzzling thing for bondholders is that the issuer promised additional mortgage assets by way of announcement before, and the affiliated company of the issuer took the lead in offsetting.
The 21st century economic reporter learned from people close to Guorong Securities that, before the 17Sanding 01 resale, in order to persuade investors to give up the resale method to provide credit extension for issuers, two hotel property rights were provided as bond collateral.
According to an additional guarantee announcement issued by Sanding Group on July 30, it intends to use Kaiyuan Du Hotel and Marriott Hotel, located in Yiwu, Zhejiang Province, as collateral to guarantee the four corporate debts of Sanding Group and take Guorong Securities as collateral.
These two hotels themselves have some property that can be split up for sale, which was promised by the government at that time, so we also regard it as full value. But because there is still a loan, it can only be mortgaged in sequence. Another bondholder said, At that time, many creditors accepted it, so they considered withdrawing the sale.
Only a month later, however, the pledged additional mortgage assets suddenly changed. On August 30, Sanding Holdingslisted company Huading announced that Sanding Holdings, as a controlling shareholder, had a problem of accounting for 597 million yuan.
It is worth mentioning that this situation arises from Huadings previous replies to the exchanges inquiries.
In its reply to the inquiry announcement of the Shanghai Stock Exchange on June 18 this year, Huading said, The company has formulated and strictly enforced the internal control system related to the management of monetary funds. It is independent of the controlling shareholders and other related parties in terms of funds. There is no co-management account with the controlling shareholders and other related parties, nor does it exist. The use of money funds by other parties.
The other side of bond default is Sanding Groups continuous expansion and investment in recent years.
According to the financial report, the total liabilities of Sanding Group increased from 7.383 billion yuan in 2016 to 10.554 billion yuan in 2018, of which the non-current liabilities increased from 1.505 billion yuan at the end of 2016 to 3.755 billion yuan at the end of 2018.
From the perspective of financial reports alone, Sanding Group should be driven by debt to make large assets, but the profitability has not been improved. In the credit contraction cycle, enterprises have liquidity risk. An analyst at a securities firm in Beijing said.
Just before the default occurred, Sanding Group also sent out the message of outward investment. On August 9, Sanding Group signed a strategic cooperation agreement with the Management Committee of Ningdong Energy and Chemical Base in Ningxia, and planned to invest 20 billion yuan in the Lactam-Polymerization-Polyamide Industry Integration Project locally. On May 28, 2018, Sanding Group also signed a contract with Pingdingshan Municipal Government and Pingdingshan Shenma Group to invest 20 billion yuan in Neoyl. Amine-Polymerization-nylon Industry Integration Project.
In a bond tracking report, Joint Rating pointed out that in 2016, shareholders of the company raised 1.8 billion yuan in the form of debt-to-equity swap to buy root carving products, which has little support for the actual operation of the company. By the end of 2018, the book value of the companys root carving assets remained about 1.5 billion yuan.
For this rare way of capital increase, some insiders believe that this may be related to the tax avoidance operation of Sanding Group shareholders.
Sanding Debt had some risk appearances, but Sanding Group did not give much explanation at that time. As early as October 24, 2018, another bond of Sanding Group, 17 Sanding 03, had a technical default on interest.
The reporter was exclusively informed that on January 11 this year, Sanding Group and Guorong Securities had communicated with the bondholders involved in structured issuance in the hope of extending the years resale, which led some institutions to choose the secondary market to sell, resulting in abnormal fluctuations in the prices of 17Sanding 01 and 17Sanding 02 and triggered the suspension of trading.
However, Sanding Group is still disclosing the issue of corporate cashing. At that time, Sanding Group said that the companys production and operation were normal, refinancing channels were smooth and its own funds were sufficient.
The company realizes in advance that it may sell back and default, but still announces that there is no problem in repaying debts. If this situation is verified, Sanding Group may involve information disclosure violations. A person close to the exchange pointed out.
Source: Responsible Editor of 21st Century Economic Report: Yang Bin_NF4368