After more than ten days of vague resignation, just today, December 18, China South City clearly informed that it could not afford to pay off the interest due on December 20.
Of course, this does not mean that China South City has constituted a material breach of contract. The "self-explosion" of South China City is actually to ask creditors to agree to the debt extension plan as soon as possible before December 20.
If the extension finally passes smoothly, South China City will once again have a chance to breathe. On the contrary, South China City will officially explode.
In view of this, in order to highlight the seriousness of the situation, China South City even mentioned the state-owned controlling shareholder SAR C&D in the announcement: if the group defaults on its debts, it will seriously affect the support of SAR C&D to China South City.
Between the words, there is a hint of threat hidden in it.
As a matter of fact, since the SAR C&D became a shareholder, it has provided so much assistance in a down-to-earth manner. But as a result, South China City is still mired in a quagmire and cannot extricate itself.
It's also quite speechless.
On December 18, China South City announced on the Hong Kong Stock Exchange that the company does not have sufficient financial resources to pay the November interest on or before December 20, 2023.
This is completely flat.
As early as December 4, China South City issued a rather heavy announcement: the interest on a note that should have matured on the 20th of last month has not been paid;Also, during the remaining one-month grace period, you may not be able to pay.
Look, there was still room for words at that time, and it may not be able to pay. However, judging from past experience, as long as the real estate company makes such an announcement, it is basically doomed, and the money will definitely not be paid.
Sure enough, South China City did not "disappoint" everyone.
Of course, it is true that China South City has not yet paid for it, but that does not mean that it has to accept the reality of defaulting on its debts.
In fact, China South City is still saving itself, and the way to save itself is to seek a debt rollover.
It is worth mentioning that what China South City wants to roll over is not this debt, but 5 bills that have been rolled over last year.
In July 2022, China South City made a big move and completed the overall restructuring of the above five notes.
It stands to reason that in order to promote the extension of debt, real estate companies, as debtors, need to express great sincerity to creditors through various methods such as raising interest rates.
However, China South City has received significant concessions from creditors.
Last year, South China City totaled about 15$6.6 billion, coupon from 725%-11.95% of US dollar bonds have been adjusted to 9%. You must know that only one of these 5 notes has an original coupon of less than 9%.
It sounds quite unbelievable that the rollover conditions really passed smoothly.
In the end, China South City successfully extended all five bonds to 2024, and will mature again in April, June, July, October and December.
In this way, China South City has successfully gained valuable buffer time.
However, given the opportunity of South China City, it is useless. Now, the debt that has been rolled over is to be rolled over again.
Creditors are not living bodhisattvas, and South China City has to be extended, so it has to be said.
But China South City obviously took it for granted, thinking that it could replicate the incredible mission last year.
The problem is that if the creditors accept the extension plan proposed by China South City, it means that not only will the coupon that has already been greatly compromised need to be further compromised, but the repayment period of these five notes will be further extended, and the longest extension period will reach 39 months.
I saw that I would be able to look forward to getting back the money next year, but after such a toss in South China City, I said that I would go directly to 2028 in 2024.
No one can accept such harsh conditions.
Not surprisingly, China South City's re-extension plan waited for a strong resistance from creditors.
Only then did China South City realize the seriousness of the problem and had to make changes to the relevant provisions.
The revised plan does have some sincerity, such as the addition of mandatory redemption obligations, the addition of additional instalments to the instalment plan, and the addition of Nanchang South City as a designated onshore asset.
However, this plan is far from waiting for the approval of the vast majority of creditors.
As recently as December 15, there was even a claim that a so-called anonymous group of temporary holders "holds a blocking claim of at least 25% of the principal amount in all five series of notes."
To put it bluntly, the re-extension plan of these 5 bills in South China City cannot be passed at all.
In view of this, China South City had to extend the voting deadline to 4 p.m. on December 18.
During this period, it was intense and intense negotiations and consultations.
On December 18, in addition to officially announcing that the interest would not be repaid, China South City also announced the relevant progress of the vote: at least a series of notes received more than 75% of the holders voted in favor of soliciting consent, and 698% of the par value holders have voted in favour of the solicitation of consent.
In other words, the plan is expected to be approved eventually, and only needs to be reworked by creditors.
It is worth mentioning that at this critical time node, South China City also moved out of the major shareholder of state-owned assets holding, the Special Zone C&D.
As a state-owned enterprise, any support provided by C&D will be subject to Chinese laws and regulations (including obtaining all relevant approvals), China South City notedHowever, the default event of China South City's debt will seriously affect the support provided by C&D to the Group to repay its outstanding debts, which include interest in November and the debt repayment obligations of the $500 million domestic financial institutions due in December 2023, will be insurmountable and constitute a difficult obstacle to further support.
Especially in the second half: if there is a default, it will seriously affect the support work of the SAR C&D for South China City.
Isn't that a proper threat?
Everyone understands that South China City has been able to get to where it is today, thanks to the support of the Special Economic Zone C&D behind it.
Even the first extension of the above-mentioned five bills relied on the endorsement of the Special Administrative Region C&D.
In May 2022, SAR C&D strategically invested in China South City to become its single largest shareholder with a HK$1.9 billion stake, making China South City complete its magnificent transformation from a private enterprise to a state-owned enterprise.
The entry of state-owned assets has greatly extended the lifeline of enterprises in South China City.
In July of that year, China South City completed the extension of five bills under the mediation of the Special Economic Zone C&D.
Subsequently, the Special Zone C&D paid out of its own pocket to collect some of the assets of South China City and provided valuable financing support for it, which really sold its strength.
However, South China City is like a dou who can't be supported.
In the final analysis, it is because the asset structure of China South City is unreasonable.
You must know that South China City's focus on the business model of "trade logistics +" makes its self-owned assets huge, accounting for more than eighty percent of the company's non-current assets.
In today's industry winter, the monetization of this business model has been hit even harder.
According to the data, as of the end of September this year, property sales in South China City rebounded by 9% year-on-year7 percentage points, but only 18HK$0.9 billion;Continuing income, which includes other continuing income and rental income, decreased significantly year-on-year, by 424%。
In other words, despite the strong support of the Special Economic Zone C&D, South China City is still unable to achieve its own hematopoiesis.
It can be seen from this that even if South China City can turn the corner again with the endorsement of the Special Economic Zone C&D, it will be in vain without the support of internal strength.