Financial Services Association, September 10 (Reporter Li Jie) In South China City (01668.HK), which once attracted widespread attention in the market due to the debt default crisis, there have been major changes in the company's management.

South China City Holdings issued an announcement on September 9 stating that two of the company's executive directors announced their resignations; among them, Geng Mei resigned as executive director and group operating president, and Zheng Jiawen resigned as executive director and authorized representative of the Hong Kong Stock Exchange Limited.

Meanwhile, Zheng Songxing, Co-Chairman and Executive Director of South China City, will also serve as an authorized representative of the Hong Kong Stock Exchange. Xu Hongxia has been appointed as an executive director and chairman of Harbin Huanan City Co., Ltd.

According to reports, Xu Hongxia joined South China City in September 2013 and is currently the party committee secretary, chairman and general manager of Harbin Huanan City. Prior to joining South China City, Xu Hongxia was the general manager of the China-Russia Timber Trading Center and the deputy director of the Qing'an County Investment Promotion Bureau.

According to South China City, Geng Mei has been working as the Group's Chief Operating Officer for many years to achieve the Group's long-term development goals. After her resignation, her day-to-day business management and CEO positions will be vacant until a suitable successor is appointed. In the past, Cheng Ka-man helped the Group achieve long-term success in matters such as optimizing administrative systems and structures, overseas financing, mergers and acquisitions, and corporate governance.

It is worth noting that the two company executives mentioned above resigned, once again drawing attention from the outside world to the operation and financial aspects of the South China City Company.

According to South China City's financial report for the first half of 2024, the company's revenue during the reporting period was HK$1.215 billion, down 51.7% year on year; gross profit of HK$0.347 billion, gross margin of 28.5%; loss during the period reached HK$4.311 billion, up 593.7% year on year; and net loss attributable to shareholders of the parent company was HK$4.311 billion.

Regarding the cause of the loss, South China City said that the loss was mainly due to a decrease in property sales and delivery during the period; loss in fair value of investment properties; an increase in inventory impairment provisions; an increase in financing costs due to a decrease in capitalized interest in the construction industry; and a decline in rental income.

In fact, as a leading developer and operator of large-scale integrated logistics and commodity trading centers in China, the company has faced many challenges in recent years.

In 2022, South China City, which is facing enormous short-term debt repayment pressure, introduced the SAR C&D with Shenzhen's state-owned capital as the company's shareholder. The latter held 29.28% of Huanan City's shares and became the single largest shareholder in South China City. Subsequently, in July 2022, the Special Administrative Region C&D purchased 50% of the shares in a South China City property company with 1.257 billion yuan in cash.

According to public information, C&D's investment in the Special Administrative Region has promoted the implementation of debt restructuring in South China City, and many foreign bonds have been rolled over, relieving liquidity pressure.

However, despite the introduction of state-owned capital, sales in South China City are still not ideal, liquidity continues to be under pressure, and cash only meets daily operating needs. In February 2024, South China City defaulted due to failure to pay maturing debts.

According to the company's semi-annual report, as of June 30, 2024, the total spot portion of South China City's interest-bearing liabilities was HK$16.891 billion, while its cash and cash equivalents were HK$37 million. As of August 30, 2024, the principal or interest payable on the HK$17.498 billion interest-bearing debt was not repaid on the scheduled repayment date (“default loan”), triggering a total interest-bearing debt of HK$13.23 billion (“cross-default loan”) to be repaid when required.

To ease debt pressure, South China City is actively promoting asset disposal.

According to South China City, the Group vigorously promotes bulk asset sales and comprehensively sells South China City properties to different customers. Among them, the bulk transaction in Huanan City in Zhengzhou has made breakthrough progress, several brand pavilions have been sold out in Huanan City in Xi'an, and Huanan City in Zhengzhou and Nanchang have successfully delivered some projects.

Industry insiders believe that changes in the company's management, huge losses in the first half of the year, and a series of asset disposal actions all indicate that South China City is in a critical period. In the future, it remains to be seen how South China City will deal with its current difficulties and whether it can get out of debt under the leadership of the new management.