Financial Services Association, March 18 (Editor Yang Bin) On March 17, Shandong Expressway Co., Ltd. (“Shandong Expressway”, 600350.SH) announced that Shenzhen Talent Security Group Co., Ltd. (“Talent Security Group”) was ruled to pay 2 billion yuan of equity transfer funds and other payments to companies under Shandong Expressway. The arbitration took more than two years and concerned Evergrande Real Estate's equity transfer dispute. Meanwhile, Shenzhen Talent Settlement Group recently received three rulings, all of which are arbitration by enterprises affiliated with Shandong Expressway over equity transfer funds for Evergrande Real Estate, totaling 8 billion yuan.

Shandong Expressway's equity investment in Evergrande Real Estate dates back to 2017.

In October 2017, Shandong Expressway and Shandong Expressway Changying Equity Investment Management Co., Ltd. (“Changying Company”) initiated the establishment of an industrial investment fund, Jinan Changying Jincheng Equity Investment Partnership (limited partnership) (“Changying Jincheng”). Shandong Expressway invested no more than RMB 5010 billion as an LP, and Changying Company invested 10,000 yuan as a GP.

Since then, Changying Jincheng plans to invest in Evergrande Real Estate projects. In November 2017, Changying Jincheng signed a “Capital Increase Agreement” with Guangzhou Kailong Real Estate Co., Ltd. (“Evergrande Real Estate”), and Xu Jiayin. Changying Jincheng invested 5 billion yuan to pledge additional capital from Evergrande Real Estate. After the capital increase was completed, Changying Jincheng held 1.1759% of Evergrande Real Estate's shares.

In November 2020, Changying Jincheng signed an “Equity Transfer Agreement” and “Equity Pledge Agreement” with Shenzhen Talent Security Group to transfer 1.1759% of the shares held by Evergrande Real Estate. Talent Security Group transferred Evergrande Real Estate's shares held by Changying Jincheng in consideration of 5 billion yuan. Talent Security Group will pay the equity transfer in 3 installments within 12 months of signing the agreement, amounting to 1.5 billion yuan, 1.5 billion yuan and 2 billion yuan respectively.

After the “Equity Transfer Agreement” came into effect, Changying Jincheng transferred Evergrande Real Estate's shares under the name of Talent Security Group in accordance with the agreement. Talent Security Group sold shares to Changying Jincheng as agreed, and paid 3 billion yuan of equity transfers and interest for the first two installments.

However, after paying the two installments, Talent Security Group failed to fulfill the follow-up payment obligation as agreed in the contract. Changying Jincheng initiated arbitration against Talent Settlement Group in accordance with the agreement. On February 23, 2022, Changying Jincheng received an arbitration acceptance notice from the China International Economic and Trade Arbitration Commission.

According to Shandong Expressway's latest announcement, the China International Economic and Trade Arbitration Commission issued [2024] China Trade and Trade Beijing ruling No. 0783 “Award” on March 15, 2024. Shenzhen Talent Security Group was ruled to pay Changying Jincheng the principal amount of the share transfer amount of RMB 2 billion and pay interest on the share transfer, late payment penalties, arbitration fees in this case, and other related expenses incurred by the applicant in connection with this case.

According to public information, Shenzhen Talent Housing Group was incorporated on June 30, 2016, with a registered capital of 100 billion yuan. It is a wholly state-owned enterprise and affordable housing franchise agency in Shenzhen. It is a platform for the Shenzhen Municipal Committee and Municipal Government to ensure that talents in Shenzhen live and work peacefully. As of the third quarter report of 2023, the total assets of Talent Security Group are 203,596 billion yuan, mainly investment in investment real estate and equity. Total liabilities were $87.187 billion, of which current liabilities amounted to RMB 31.23 billion; the company's account capital was RMB 26.630 billion.

Shenzhen Talent Housing Group has a total of 15 bonds in stock, with a scale of 14.985 billion yuan, of which 3 billion are due within one year. The company just issued two ABS “24 Anju 1C” and “24 Anju 1A” on February 26, 2024, with a coupon interest rate of 3%.

In fact, the dispute between Shenzhen Talent Settlement Group and Shandong Expressway over the equity transfer of Evergrande Real Estate went beyond the 2 billion yuan mentioned above.

In addition to Changying Jincheng, in November 2020, Shandong Expressway subsidiaries Shandong Expressway Resources Development Management Group (“Shandong Expressway Resources”) and Shandong Expressway Investment Holdings Co., Ltd. (“Shandong Expressway Holdings”) transferred 2.1167% and 1.4111% of the shares in Evergrande Real Estate to Shenzhen Talent Housing Group, respectively. Together with the shares held by Changying Jincheng, the total share transfer amount this time is 20 billion yuan. Shandong Express Resources, Shandong Express Investment, and Changying Jincheng all submitted arbitration applications to the China International Economic and Trade Arbitration Commission in January 2022, requesting Shenzhen Talent Settlement Group to pay the outstanding principal amount of the equity transfer and other related expenses.

According to an announcement issued by Shenzhen Talent Settlement Group today, the company recently received three rulings ruling that the company paid a total of 8 billion yuan in principal and interest on equity transfers, and late payment penalties.

Shandong Expressway said that the “Changying Jincheng” case has been decided, but Talent Security Group has yet to implement it, and it is not yet possible to determine the amount of impact of this arbitration matter on the company's current or future profits. The company will promptly disclose subsequent developments, and investors are kindly requested to pay attention to investment risks.

Currently, Shandong Expressway has a total of 9 bonds in stock, with a scale of 9.50 billion yuan, and 4 billion yuan due within a year.