China Times Finance Original Producer Author: Di Ruifang Editor: Zhou Xuesong Drawing: Qiao Hanyun
According to Country Garden (02007HK) 2023 interim report, as of the first half of 2023, the company's revenue achieved was approximately RMB2263100 million yuan. However, in order to ensure delivery and operation, the company made a balanced arrangement for some assets, which ultimately resulted in a net loss of approximately RMB453500 million yuan. In addition, the company's current liabilities are as high as RMB12 trillion yuan.
On August 11 this year, a letter of apology signed by Yang Huiyan, chairman of the board of directors of Country Garden, and Mo Bin, president of Country Garden, expressed Country Garden's helplessness and reflection in the current predicament. In order to "turn the crisis into vitality and forge a healthier Country Garden", the company launched a series of self-help actions.
Experts generally agree that it is normal for real estate to fluctuate with macroeconomic fluctuations. In the context of the current real estate policy adjustment, market confidence will be further restored, and the property market will get rid of the current trough state.
A two-pronged approach to reduce external debt risk
Before the market on December 14, Country Garden issued an announcement on the Hong Kong Stock Exchange, announcing the signing of agreements with Wanda Commercial Management Group and Zhuhai Wanying. According to the agreement, Jinyi Global, a subsidiary of Country Garden, has a conditional stake**, while Zhuhai Wanying or Wandafang's designated party will conditionally pay 306.9 billion yuan to purchase its Zhuhai Wanda Commercial Management 179% equity.
According to the prospectus information of Zhuhai Wanda Commercial Management, Country Garden has invested 32300 million yuan, holding about 179% equity. There are also 22 institutions participating in Zhuhai Wanda Commercial Management's strategic investment, including Zheng Yutong's family, CITIC Capital, Ant, Tencent, and PAG Investment Group, with a total investment of about 38 billion yuan and a total shareholding of about 2117%。
The implementation of this agreement is the fulfillment of the previous VAM agreement, that is, if Zhuhai Wanda Commercial Management is not listed by the end of 2023, Wanda Commercial Management Group is responsible for repurchasing shares.
Although the transaction resulted in a loss of 16.1 billion yuan, but the company emphasized that it is actively resolving the pressure of phased liquidity. Country Garden believes that equity will help lock in more suitable transactions and exit paths in advance, so as to avoid major uncertainties in the future time and amount, and effectively protect the value of the company's strategic investment equity assets, which will be beneficial to the company. Country Garden is seeking a holistic solution to address the current offshore debt risk, and the net proceeds from the target shares** will be used for overseas restructuring.
Yuan Chengjian, head of Jiancheng Think Tank, told China Economic Times that the successful equity withdrawal brought valuable cash flow to Country Garden, which helped alleviate the company's debt crisis. Liquidating long-term equity investments for operations not only reduces financial pressure, but also sends a positive signal to the market and investors. At the same time, it also avoids falling into the uncertain listing road of Wanda Commercial Management in the later stage, and reduces the risk in the later stage.
Just the night before the announcement, Country Garden also issued an announcement on the results of the resale of "22 Bidi 02" bondholders. According to the announcement, holders of "22 Bidi 02" bonds have the right to choose to register during the investor resale registration period (November 22, 2023 to November 28, 2023), and sell back all or part of the current bonds held by them to the issuer at face value, with a resale** of 100 yuan (excluding interest).
According to the data provided by the Shenzhen Branch of China** Registration and Clearing Co., Ltd., the number of effective resale declarations for "22 Bidi 02" during the resale registration period is 8 million, and the resale amount is 800 million yuan (excluding interest).
Country Garden said that the principal and interest of the "22 Bidi 02" resale part of the bonds have been paid in full to the designated bank account of the Shenzhen Branch of China ** Depository and Clearing Co., Ltd., and "22 Bidi 02" will be delisted on the Shenzhen ** Exchange on December 14, 2023.
Yuan Chengjian believes that Country Garden sold back the bonds this time and paid the principal and interest in full, which conveyed positive confidence to the market and showed that the company is actively avoiding debt default. The early repayment of the principal of the debt and the delisting of the bonds show the determination to reduce the debt.
Executive salaries were cut to improve the vitality of internal operations
Country Garden's determination to face the predicament is not limited to the above-mentioned actions, but also a series of "cost-saving" measures aimed at reducing costs and improving efficiency. On the evening of December 12, Country Garden announced that the company's executive directors Yang Huiyan, Mo Bin, Yang Ziying and non-executive director Chen Chong took the initiative to request a reduction in salary, and had signed a supplementary agreement and supplementary appointment letter with the company on November 1, adjusting the annual salary to 120,000 yuan, compared with the original annual salary of the above four people of 370,000 yuan, 3 million yuan, 2 million yuan and 370,000 yuan respectively.
Country Garden said that the salary adjustment is based on the actual business needs of the industry and the company. In the past two years, Country Garden has adjusted the remuneration of a number of senior executives, including the vice president of the company's general operation department, the general manager of the functional center and above, and the regional president, which has decreased by 86%.
In addition, Country Garden has also cancelled the treatment of senior executives' car allocation, medical examination reimbursement and free canteen, and all group buses have revitalized their assets through internal public auctions and foreign workers' debts, further reducing costs.
Zhao Xiuchi, dean of the Beijing-Tianjin-Hebei Real Estate Research Institute of Capital University of Economics and vice president and secretary general of the Beijing Real Estate Law Society, believes that the salary cut of senior executives is not only conducive to reducing costs and increasing efficiency and improving financial conditions, but also alleviates the wage gap between executives and ordinary employees, makes the salary distribution more fair, improves the enthusiasm of ordinary employees, and shapes the corporate culture of executives and ordinary employees sharing weal and woe and overcoming difficulties together.
At Country Garden's internal monthly management meeting on December 8, Yang Huiyan, chairman of the board of directors, said, "The family will definitely sell iron to support the company, and the company will strive to become a model for the recovery of insurance companies as soon as possible." The declaration also reflects the determination to share weal and woe and overcome difficulties together.
At the meeting, Yang Huiyan clarified the company's main work goals for the next 12 months: "to ensure delivery, operation and credit". Among them, guaranteed delivery is the company's No. 1 priority.
Country Garden said that in the first 11 months of this year, the company has delivered about 500,000 houses, involving 31 provinces and 240 cities, with a delivery area of 60.43 million square meters. However, in the face of the deep water area of delivery challenges in the next 12 months, Country Garden's delivery volume is expected to exceed 400,000 units in 2024, which is still a huge number and requires great attention and full planning.
For the problem that capital is the lifeblood of real estate enterprises, Zhao Xiuchi believes that because China's real estate development is an agency system, real estate companies need to advance a large amount of funds such as land and housing construction in advance. Therefore, in order to solve the problem of "guaranteed delivery" of risk-related real estate enterprises, on the one hand, it is necessary to have a relaxed financing environment, allow risk-related real estate enterprises to refinance, and extend the repayment period;On the other hand, it is also necessary to adjust the outdated policies such as purchase restrictions, loan restrictions, price restrictions, and sales restrictions, so that developers can recover housing payments and make development and construction funds have stable funds**.
Zhao Xiuchi said that the current real estate predicament is temporary, not only due to the impact of the three-year epidemic, but also affected by strict real estate regulation and macroeconomic downturn. In the case of a series of outdated real estate policy adjustments, market confidence will be further restored, and the property market will come out of the trough, because China's urbanization is still in the accelerated stage, a large number of rural people continue to move into the city, and a large number of rigid demand and improved housing demand still exists.
Rational, objective and uniqueDirector system丨Wang Hui Wang inheritanceProducer丨Li Piguang, Wang Yu, Liu WeiminChief Planner丨Wang SongcaiEditor-in-Chief丨Zhou Xuesong Deputy Editor-in-Chief丨Zhang Limin