Finance Association, Feb. 22 (Reporter Li Jie) Jinke Co., Ltd., which has been out of business for nearly 2 years, has made new progress in resolving the debt problem.

Recently, Jinke Co., Ltd. issued a notice on the company's application for restructuring. It officially submitted the relevant information on the restructuring application to the Fifth Intermediate People's Court of Chongqing on February 21, 2024. The Fifth Intermediate Court accepted the company's restructuring application materials after review (case number is (2024) Chongqing 05 No. 129).

Jinke Co., Ltd. said that after the restructuring application materials are accepted by the court, the company will steadily and steadily advance the restructuring work in legal compliance, systematically resolve the company's debt risks, and push the company to achieve a virtuous cycle faster.

“Jinke's application to the court for restructuring is a measure taken in the face of financial difficulties. The purpose of restructuring is to resolve debt issues through judicial procedures, optimize corporate governance structures, and restore profitability, thereby protecting the legitimate rights and interests of creditors, shareholders, and employees.” Bai Wenxi, chief economist at IPG China, told reporters.

Shen Meng, executive director of Chanson Capital, pointed out that the restructuring mainly involves adjustments to the balance and liability structure, including but not limited to debt-for-equity swaps.

“If the restructuring can be successfully completed, the company's debt burden, especially the interest burden, will be greatly reduced. However, if creditors are unable to reach a consensus on restructuring, or if the restructuring plan cannot proceed, causing the restructuring to fail, they may enter the liquidation process.” Shen Meng said.

Why did Jinke choose to restructure?

Is restructuring the same as bankruptcy liquidation? In response, Jinke Co., Ltd. made it clear in the announcement that restructuring is different from bankruptcy and liquidation. The restructuring is a judicial procedure aimed at saving the debtor's enterprise, restoring the company's continued profitability, and protecting the legitimate rights and interests of creditors.

It stated that restructuring is an effective way to mitigate risks through marketization and the rule of law. Currently, there are a large number of successful cases of restructuring of listed companies in the market, all of which have achieved good economic and social results.

As can be seen, unlike other insured housing enterprises that choose debt rollover and debt restructuring, Jinke Co., Ltd. is one of the few insured housing enterprises that have voluntarily applied for restructuring.

Attorney Wang Yuchen of Beijing Financial Law Firm told reporters that restructuring and debt rollover are two different strategies for companies facing financial difficulties. Restructuring is usually a method used when an enterprise is unable to resolve a financial crisis by other means; debt rollover, on the other hand, delays the repayment period of a debt to give the enterprise more time to raise capital.

“Jinke chose to restructure based on its special circumstances as a listed company and considering the long-term development of the company to protect the rights and interests of creditors and shareholders. Restructurings may involve broader financial and operational restructuring issues, not just debt adjustments.” Bai Wenxi said in an interview with reporters.

“Jinke chose to restructure over debt rollover, probably because the company's financial situation was less optimistic and needed a more thorough solution.” Wang Yuchen believes that compared with debt rollover, restructuring may have a greater and more profound impact on enterprise structure and operation, including the possibility of handing over certain management rights, major changes in shareholders, sale of assets, business adjustments, and major changes in management.

In fact, Jinke is already planning to bring in strategic investors. According to reports, Jinke has now signed a strategic investment framework agreement with Great Wall Guofu Real Estate Co., Ltd.

It will still take a certain period of time for the restructuring process to be implemented

A number of interviewed experts told the reporter that after applying to the court for restructuring, Jinke will still face a series of legal procedures. This process may take months or even longer.

Shen Meng told reporters that after the court accepts and approves the restructuring, the restructuring manager will be appointed, and the restructuring manager will lead discussions with creditors on debt restructuring and the formulation of related plans. After the final plan is approved by the creditors, it is then approved and implemented by the court. The specific length of the cycle depends on the negotiation process.

“The exact period may vary depending on the complexity of the case and the efficiency of the court. It usually lasts from a few months to one or two years, or even three to four years.” Wang Yuchen said.

However, the future development trend of Jinke after the restructuring also depends on the effectiveness of the implementation of the restructuring plan.

Bai Wenxi believes that if restructuring is successful, enterprises may reduce financial burdens and restore operational capacity through debt restructuring, asset restructuring, etc., thereby returning to a healthy development path and enabling the enterprise to achieve “nirvana and rebirth.” However, the restructuring process is complicated and requires full cooperation from the courts, creditors, shareholders, etc., and the final outcome is uncertain.

Jinke said that since applying to the competent court for restructuring involves extensive preliminary preparations, Jinke Co., Ltd. has set up a special team in the early stages and actively promoted various tasks with the guidance and help of the Chongqing Municipal Government Work Class and the district government, and has systematically carried out comprehensive investigations on the debtors' property status and debts, communication with creditors, and formulation of stabilization plans.

“Jinke Co., Ltd. will actively support and cooperate with related work to promote restructuring as soon as possible, not only to resolve the risk of the company's existing debt, but also to protect the legitimate rights and interests of all creditors and funders.” According to the financial department.

According to the 2023 three-quarter report of Jinke Co., Ltd., its total liabilities were 227.1 billion yuan, of which non-current liabilities due within one year were 35.06 billion yuan.

In addition, according to the 2023 annual performance forecast of Jinke Co., Ltd., it is estimated that net profit losses attributable to shareholders of listed companies in 2023 will be between 4.8 billion yuan and 7.8 billion yuan, compared with a loss of 21.392 billion yuan for the same period last year. Net profit loss after deducting non-recurring profit and loss ranged from 3.6 billion yuan to 6.6 billion yuan, compared with a loss of 20.52 billion yuan for the same period last year.