Financial News on November 19th (Reporter Liang Xiangcai) After three years of the bankruptcy of Zhongwang Group, known as the "Aluminum King of Asia," creditors finally welcome new developments in bankruptcy reorganization, as Xiamen Xiangyu (600057.SH), a bulk commodity trader controlled by Xiamen State-owned Assets Supervision and Administration Commission, together with its group company and other investors, plan to establish the "New Zhongwang Group."

A source close to the company told Financial News reporters that in this restructuring, the Zhongwang side is led by the local government, Xiangyu Group is also undergoing audits as required by the State-owned Assets Supervision and Administration Commission, and the assessment of Zhongwang's assets and detailed pricing in the future will strictly follow regulations and procedures, also subject to review by the State-owned Assets Supervision and Administration Commission.

Tonight, Xiamen Xiangyu announced that as the preferred investor in the restructuring of the Liaoning Zhongwang Group series companies, its controlling shareholder, Xiangyu Group, together with other investors, plans to invest in the aluminum business assets and other restructuring assets of the Zhongwang Group. The company intends to participate as an industrial investor.

Specifically, Xiamen Xiangyu's wholly-owned subsidiary, Smart Logistics Port, plans to jointly establish a joint venture company with Xiangyu Group's wholly-owned subsidiary as the investment entity on the Xiangyu side. The registered capital of this joint venture company is planned to be 4.3 billion yuan. Among them, Smart Logistics Port will contribute 0.69 billion yuan and hold 16.0465% equity; the equity of the new company (referred to as the "New Zhongwang Group", subject to the specific name registered by the industrial and commercial management department) established by acquiring the aluminum business assets of Zhongwang Group will be jointly invested by this joint venture company and investors introduced by Xiangyu Group, becoming the controlling shareholder of the New Zhongwang Group.

Regarding the sources of other industrial investors, the aforementioned individuals stated: there is no exclusion of previous creditors participating, it is indeed debt-for-equity swaps, with companies controlled by the State-owned Assets Supervision and Administration Commission taking over the restructuring of Zhongwang Group. For the creditors, this is also a good thing, providing more secure guarantees for subsequent development and operation.

As for the reasons for participating in the restructuring of Zhongwang Group, the announcement stated that by investing in the New Zhongwang Group together with the controlling shareholder, the company can leverage its supply chain service advantages to effectively drive cooperation in the supply chain business with the company's aluminum product manufacturing clients, benefiting the further enhancement of the aluminum industry chain's operation and development. At the same time, following the completion of asset integration and stable operation of the project, it is expected to bring certain investment returns to the company.

The same individuals also stated that for Xiamen Xiangyu, as the group 'carries the heavy burden,' participating as an industrial investor, if this restructuring proceeds smoothly, the company, as a bulk commodity trader, can to a certain extent have a stable source of goods, fostering synergistic development.

Regarding the assets of Zhongwang Group, the announcement shows that it currently has four major business sectors: the electrolytic aluminum sector has a commissioned electrolytic aluminum production capacity of 0.75 million tons, carbon production capacity of 0.5 million tons; the aluminum extrusion sector has a commissioned production capacity of over 1 million tons; the aluminum rolling sector has a commissioned production capacity of 1.8 million tons; the deep processing sector mainly engages in new energy autos, rail transportation, all-aluminum furniture, and other areas.

It is worth noting that there is still a risk of debt restructuring. Xiamen Xiangyu stated in the relevant risk warning that, according to the Enterprise Bankruptcy Law, after the completion of the restructuring plan execution, unreported creditors can still claim and exercise their rights according to the repayment conditions of similar debts specified in the restructuring plan.

In response to this, the company also announced countermeasures: the administrator reserves some debt repayment resources to cope with potential future debt. When the reservation period expires and no creditors have declared or requested repayment, it will be deemed that the creditors have waived their right to seek repayment. The reservation period is three years from the date on which Shenyang Intermediate Court accepted the restructuring of the core controlling enterprise Zhongwang Group (September 2, 2022).

"In the debt-for-equity swaps in bankruptcy reorganization, whether the original creditors convert based on a hundred percent of the debt or based on a certain repayment rate depends on the details of the relevant plan," said professionals experienced in bankruptcy reorganization to reporters. The ruling on the restructuring plan is the beginning of the challenging execution process, and not all bankruptcy reorganizations are successful. During the reorganization process, the key issues to be faced include how to ensure the participation and exit channels for debt-for-equity swap shareholders, how to protect the shareholders' rights in case of reorganization failure, and whether the registered and successfully replaced equity can be restored to bankruptcy claims.

It is noteworthy that as a dominant force, Xiangyu Group has strong capabilities, with public information showing that in the 2024 list of China's top 500 enterprises, Xiamen Xiangyu Group ranks 54th, with revenue of 490.498 billion yuan in 2023 and a net profit of 0.995 billion yuan; Xiangyu Group's business areas cover csi commodity equity index supply chain, urban development operation, comprehensive financial services, port shipping, and innovation incubation.