When facing thousands of listed company announcements every day, which ones should you read? What are the key points to take away from the dozens or hundreds of pages of material announcements? Are the many professional terms in the announcements bullish or bearish? Check out Caixin's "Quick Read Announcement" column, where our reporters across the country will provide you with accurate, fast and professional interpretations on the night of the announcement.

On August 1st, Caixin reported that Rifa Precision Machinery, whose stock price has risen five days in a row, announced that the near CNY 600 million loan of its important subsidiary Airwork from a banking consortium has become overdue. Against the backdrop of Airwork's poor operating conditions in recent years, this incident has raised concerns about Airwork's ability to pay off its debts and may have an indirect negative impact on the credit business of Rifa Precision Machinery and other subsidiaries.

According to the announcement, in April 2019, Airwork used the entirety of its existing and future assets as collateral to sign a banking consortium loan contract. As of July 31, 2024, the principal to be repaid for this banking consortium loan matured and amounted to USD 83.356 million and NZD 0.2308 million respectively, a total of about CNY 596 million, but was not repaid on time, resulting in the overdue loan. In fact, regulatory authorities have been concerned about the potential default risk of Airwork. In its 2023 annual report inquiry response to the Shenzhen Stock Exchange on June 14th, Rifa Precision Machinery stated that Airwork believes it can obtain sufficient operating funds and financing sources to ensure that it can repay or smoothly handle the maturing debt within 12 months after December 31, 2023.

However, this response was only one and a half months ago, and Airwork's debt default issue has already emerged. Public information shows that as a company with more than 80 years of aviation service experience, Airwork was fully acquired by Rifa Precision Machinery in 2018. Since then, "aviation operation and service" has become one of the two main businesses of Rifa Precision Machinery. However, the complex and changing international situation and geopolitical conflicts have had a significant adverse impact on its business.

In 2023, Rifa Precision Machinery had a net loss of CNY 0.903 billion, while Airwork had a net loss of CNY 0.84 billion. In its annual report, Rifa Precision Machinery stated that Airwork's operations in Russia have not yet recovered since being affected by bilateral relations and mutual sanctions between the European Union, the United States, New Zealand, and Russia. In addition, the intensified competition in the air cargo market in 2023 and the impact of insufficient industry and customer demand have prevented Airwork from fully recovering its performance.

It is worth noting that Rifa Precision Machinery pointed out that due to the above-mentioned overdue debt, Airwork may face risks such as paying related default interest, late fees, and penalty interest, and may also face the risk that the existing banking consortium loan contract cannot be fulfilled normally, and may follow with related enforcement, lawsuits, and seizures and freezing.

In addition, Airwork is an important subsidiary of Rifa Precision Machinery, and the above-mentioned overdue debt may have an indirect negative impact on the domestic bank loans and credit business of Rifa Precision Machinery and other subsidiaries. In the face of Airwork's loan default, Rifa Precision Machinery stated that it has implemented multiple measures to improve its financial situation and reduce its pressure on working capital, including selling some aircraft-related assets.

So far, Airwork has sold four aircraft bodies and four engines, realizing a sales revenue of about CNY 0.052 billion from the sale of aircraft-related assets. Airwork will accelerate the sale of the remaining planned aircraft-related assets to recapture the funds.

According to the company's 2023 annual report, Airwork plans to dispose of 14 aircraft bodies and 24 aircraft engine assets, resulting in the need to accrue asset impairment losses of CNY 0.66 billion.

In addition, Airwork's board of directors and management are actively negotiating with the banking consortium to reach a consensus on the debt resolution plan to resolve the overdue loan problem as soon as possible.

Thus far, Rifa Precision Machinery stated that Airwork's potential debt problem has been resolved through various means, including its planned sale of certain aircraft-related assets.

According to the company's 2023 annual report, Airwork planned to dispose of 14 aircraft bodies and 24 aircraft engine assets, resulting in the need to accrue asset impairment losses of CNY 0.66 billion.

In addition, Airwork's board of directors and management are actively negotiating with the banking consortium to reach a consensus on the debt resolution plan to resolve the overdue loan problem as soon as possible.