Guide to this report:
On the morning of December 9, 2022, the company announced a debt restructuring plan. For the current debt of 9.1 billion US dollars, the company resolved the current debt problem in the form of partial debt-for-equity swaps for partial new invoices, reducing the leverage ratio while improving its ability to operate sustainably.
Summary:
Maintain the company's “prudent increase” rating. Considering that the timing and specific plan of the company's debt restructuring are still unclear, and future profit predictions have not been made for the time being, the company has been suspended since April 2022. Currently, it continues to be suspended and is still unable to trade, actively follows the progress of subsequent restructuring, and maintains a “prudent increase in holdings” rating.
The company announced a debt restructuring plan to resolve the crisis mainly in the form of debt-for-equity swaps. The company announced on the morning of November 9, 2022, that the company presented a preliminary restructuring plan after communicating with senior notes totaling 9.1 billion US dollars and other overseas debt holders and their advisors. It mainly includes 4 elements: 1) It is proposed to convert the 3 to 4 billion US dollars of debt and certain shareholders' loans into common shares or equity linked instruments, adjust the capital structure while addressing the concerns of foreign creditors, and achieve the purpose of reducing leverage; 2) convert the remaining existing debt into new public notes denominated in US dollars. The period is 2-8 years from the effective date of the restructuring in order for the company to resume operations and To restore liquidity, it is anticipated that part of the interest on the new notes for the first two years after the restructuring may only be accrued and not paid, and then the relevant interest will be paid in cash; 3) the net proceeds from the disposal of certain assets will be used as an additional source of funding to repay the new notes; 4) consent fees will be provided to creditors supporting the restructuring plan.
Debt-for-equity swaps are currently one of the most effective ways to resolve the crisis of private housing enterprises. The current crisis of private housing enterprises has changed from a short-term liquidity crisis to a medium- to long-term credit crisis, while the method of debt-for-equity swaps is to adjust the capital structure of private housing enterprises in a medium- to long-term manner to achieve sustainable management, thus effectively coping with the reasonable value realization of real estate and land assets in the company's hands and resolving the credit crisis.
The company responded positively to the debt problem and launched the first round of debt-for-equity swaps for private housing enterprises. It is expected that it will return to the middle and high-end real estate market after overcoming the debt crisis in the future. The company responded positively to the debt problem, took the lead in coming up with effective solutions, and also set an example for housing enterprises to overcome the current debt crisis. Since the company's insurance, its sales scale has declined further along with the industry's decline. In the first 11 months of 2022, the company achieved sales of 161.1 billion yuan and 12.18 million square meters, a year-on-year decline of 70.7% and 68.3%, respectively.
Currently, the supervisory authorities are intensively introducing real estate stimulus policies. Relying on the brand power that the company has accumulated in the past, it is expected that the restructured company will be able to operate more steadily in the middle and high-end markets.
Risk warning: Market demand declined more than expected, and progress in debt restructuring fell short of expectations.