On June 7th, Gelunhui, Shanghai Zendai (00755.HK) announced that on June 7, 2024, the company (as the seller) and a potential buyer entered into a non-legally binding memorandum of understanding on the proposed sale by the company of all the equity interests in several subsidiaries of the company to the buyer.
The target companies to be sold will hold property assets in the Group's Shanghai Zendai Thumb Plaza project, Qingdao Zendai Thumb Plaza project and several other projects, as well as carry most of the Group's interest-bearing borrowings. According to the memorandum of understanding, after the proposed sale is completed, the buyer will appoint the company to provide reform engineering consulting, operation and management services for the Shanghai Zendai Thumb Plaza project.
In the downward trend of the industry, the group's financial condition continued to deteriorate due to the heavy debt financing structure established in the past. Repaying interest-bearing borrowings has caused significant financial pressure and cash flow consumption to the group. As the group faces multiple uncertainties related to ongoing business operations, the auditor of the group has given a disclaimer on the group's comprehensive financial statements for the year ended December 31, 2023. This is the fourth consecutive year that the auditor has given a disclaimer on the comprehensive financial statements of the group since the year ended December 31, 2020. The consecutive disclaimers on the group's comprehensive financial statements and the deteriorating financial condition make it difficult for the group to be included in the credit list of financial institutions, making it difficult for the group to obtain financing from financial institutions.
The group is constantly exploring and implementing plans to solve ongoing business problems and improve the financial condition of the group. For example, the group actively negotiates with financial institutions on extending maturity dates, adjusting repayment arrangements and/or formulating repayment plans. In 2022, the group also sold several subsidiaries to a major shareholder, reducing interest-bearing borrowings by approximately 60% or HKD 4.1 billion and financing costs by approximately 75% or HKD 735 million for the year ended December 31, 2023. The proposed sale is also one of the solutions studied by the group to mitigate this situation.