Author Li Dunmin; Editor Ma Jia
Country Garden, known as the "cosmic housing enterprise", is now pushed to the cusp of "bankruptcy" due to debt problems.
In the wake of the liquidation application filed by creditorssixTianhou,threemoonfourOn the evening of Sunday, Country Garden officially released it.threeThe monthly management meeting, in addition to talking about Country Garden’s efforts to ensure delivery and stable operation, said that the company’s founders and shareholders never wanted to lie flat.
This sudden application for liquidation is even worse for Country Garden, which is already short of funds. On February 28th, Country Garden announced that the company had received a liquidation petition from Ever Credit Limited (the applicant), involving an unpaid term loan with a principal of about HK$ 1.6 billion and accrued interest.
Ever Credit Limited is a subsidiary of Hong Kong Jiantao Group, a leading copper panel manufacturer. The company pointed out that the presentation of the petition does not mean that the petitioner can successfully liquidate the company, and the High Court has set the first hearing date of the petition as May 17, 2024.
Although being filed for liquidation by creditors does not mean liquidation or bankruptcy, forcing creditors to file an application also means that the liquidity problem of Country Garden is imminent. In the past three years, 35 large and small housing enterprises such as Evergrande, Longguang and Sunac have defaulted on domestic and foreign bonds, especially the Evergrande incident, which has had a huge impact on the whole real estate market.
Country Garden, which has always been known for its "financial stability", has not been spared. Country Garden’s latest announcement made the bleak situation public. According to Country Garden’s disclosure, the unaudited operation data showed that the contracted sales amount in February 2024 was about 3.72 billion yuan, and the contracted sales floor area attributable to the company’s shareholders’ equity was about 370,000 square meters.
You know, even in 2022, the average monthly equity sales of Country Garden will be 30 billion yuan. According to previous data, in 2023, Country Garden realized an equity sales amount of 174.28 billion yuan, a year-on-year decrease of 51.25%.
It is worth mentioning that Yang Huiyan, who is also the second-generation successor like Fuli Zong, faced "the biggest difficulty since the company was founded" after taking over from his father Yang Guoqiang as the chairman of the Board of Directors of Country Garden Group in March 2023.
Lossy performance, pressure from creditors, liquidity crisis of the company … Will this liquidation petition of Jiantao Group become the last straw to overwhelm Country Garden’s trillion-dollar debt crisis? Can Country Garden, which starts the crazy "sale" rhythm, walk out of a different road from Evergrande? Can Country Garden, which suffered the biggest crisis since its establishment, land smoothly after debt restructuring?
01. "liquidation" or a fuse?
This is not the first time that Country Garden has been "debt-collected" by Jiantao Group.
As a creditor and shareholder of Country Garden, Jiantao Group is now one of the largest producers of copper-clad panels in the world, and its business scope has developed from copper-clad panels to printed circuit boards, chemical products and domestic real estate. The actual controller is Leslie Cheung, who is known as the "chemical king" in Hong Kong.
The trigger for the "trouble" of Jiantao Group to Country Garden came from August 8, 2023, when a Country Garden failed to pay the coupon of two US dollar debts totaling US$ 22.5 million, which exposed the liquidity risk of Country Garden.
As a creditor of Country Garden, Jiantao Group smelled the crisis. It turned out that at the end of 2021, Country Garden borrowed 1.88 billion Hong Kong dollars from Jiantao, and after repaying the first loan of about 300 million Hong Kong dollars, Country Garden, whose finances were gradually tense, could not continue to pay back the money.
In order to appease Jiantao Group, in August 2023, Country Garden issued about 351 million new shares to Jiantao, which offset some of the arrears. Jiantao became a shareholder holding about 1.25% of Country Garden shares at a lower cost. As a result, the loan owed by Country Garden to Jiantao Group has also dropped from HK$ 1.88 billion to about HK$ 1.598 billion. However, according to the financing agreement, the remaining loan will be repaid in December 2023. However, the good times didn’t last long, and the liquidity crisis was like a domino. Two months after publicly admitting financial difficulties, Country Garden still had to choose the "road to survival" and start debt restructuring at home and abroad. On October 10th, Country Garden announced that it would seek an overall solution for overseas debt.
With the debt restructuring of Country Garden at home and abroad, the loan of Jiantao Group is also in the restructuring. After learning that Country Garden started debt restructuring, Jiantao Group issued a statutory debt repayment letter in October 2023, demanding that Country Garden pay its debts. Now it seems that after months of negotiation, the two sides have been unable to reach an agreement on debt repayment. So Jiantao Group directly appealed to the court without stopping, and adopted a more radical way of "asking for money".
In response, Country Garden expressed its strong opposition to the liquidation petition, saying that "the radical action of a single creditor will not have a significant impact".
Bai Wenxi, chief economist of IPG China, believes that this application for liquidation is an important signal for Country Garden, indicating that the financial pressure faced by the company is increasing, and at least one important creditor is worried about its financial situation.
Although "tough", Country Garden still can’t escape the current financial difficulties.By the end of 2022, Country Garden’s total liabilities totaled 1.43 trillion yuan, including contractual liabilities of 668.2 billion yuan, accounting for 46.57%, nearly half of the total liabilities.
Among them, as of June 30, 2023, the scale of interest-bearing liabilities only decreased from 271.3 billion to 257.9 billion yuan, a decrease of less than 5 percentage points. In addition,Within one year, the debt to be repaid reached 121.632 billion yuan, while Country Garden had only 101.115 billion yuan in cash and equivalents.
Undoubtedly, the debt collection of Jiantao Group may trigger a series of chain reactions, which is likely to become a catalyst for Country Garden’s debt crisis.
02, the king of the third and fourth lines, into Xiao He, also played havoc?
Yang Guoqiang, the founder, once boasted that Haikou wanted to be "the first in the world", from a dark horse who started in the third and fourth lines to a global industry sales champion.
With Yang Guoqiang’s strong skills and unique "management philosophy", Country Garden has also developed from a local housing enterprise in a corner to the whole country. Country Garden once stood on the wind and benefited from the upsurge of "shantytown renovation" after 2015, so that Country Garden entered the third-and fourth-tier cities in China in a big way. In just a few years, Country Garden’s real estate map has extended from the first and second tier to the third, fourth and fifth tier cities, and has rapidly grown into a leading real estate enterprise, even known as the "cosmic real estate enterprise". In 2020, the company’s sales exceeded 570.7 billion yuan for the first time, setting a record high.
By the end of 2022, Country Garden had about 955.5 billion yuan in marketable equity resources and about 252.8 billion yuan in marketable potential equity, totaling about 1.2 trillion yuan.It is reported that the company’s nearly one trillion soil reserves,About 40% are for the first-and second-tier markets, and nearly 60% are for the third-and fourth-tier markets.
However, it was too late when Country Garden reflected on the problem of "excessive investment in third-and fourth-tier cities and lower-tier cities". Since 2022, Country Garden’s equity sales amount in that month turned negative year-on-year. From January to July 2023, Country Garden’s accumulated contracted sales amount was 140.8 billion yuan, down 35% year-on-year, especially in July, when the monthly sales scale was 12.1 billion yuan, down 60% year-on-year.
The sudden stall in sales directly led to a net loss of 51.4 billion yuan in Country Garden in the first half of 2023. In explaining the reasons for the loss, Country Garden not only mentioned the impact of the downward sales of the real estate industry and the exchange loss caused by foreign exchange fluctuations, but also said that it failed to grasp the "potential risks such as excessive investment ratio" in small cities.
(Source: Eastern Fortune Choice Data)
Re-betting on third-and fourth-tier cities also stems from Yang Guoqiang’s strength and paranoia."Frankly speaking, I’m an unconventional person, like a madman." The self-evaluation of Yang Guoqiang, the founder of Country Garden, appeared in the book My 1000 Days in Country Garden: Yang Guoqiang and His Real Estate Kingdom from the Financial Perspective by Wu Jianbin, the former executive director and chief financial officer of Country Garden Group.
At present, the debt disagreement of Country Garden has also been hotly discussed.Wu Jianbin had hoped that Country Garden would strengthen its budget management, and that "the scale and net profit should increase synchronously". However, Yang Guoqiang felt that his business model had been questioned and did not agree with his research results. Yang is more concerned about the sales growth.
In July 2015, in the meeting on value management, Wu Jianbin once again emphasized the management of debt ratio ceiling, suggesting not to easily expand. However, Yang Guoqiang was angry. "Today, seeing the P/E ratio of the New Third Board and small and medium-sized enterprises is so high, it is false. You can’t learn … I think it’s better to make the real estate business bigger … I am the chairman, just do as I say. "
However, the rapid change of forms is often unpredictable. The so-called man can conquer nature, and in many cases it is only a footnote under the torrent of the times. Country Garden said that since 2021, the industry has entered an unprecedented difficult period, and multiple unfavorable factors are superimposed, resulting in severe difficulties and challenges in industry sales and open market financing.
03, "all-round" self-help
Nowadays, self-help and survival have become the biggest sword around Country Garden.
From self-help measures such as salary reduction and layoffs to the mode of "selling and selling", Country Garden, as an industry survivor, has reached the most critical moment.Especially after the rumors that the founder left the country and transferred assets through charitable funds.Yang’s father and daughter showed the sincerity of actively paying off debts, and dealt with the debt and property delivery problems by increasing shareholders’ holdings, transferring project equity and selling private jet assets.
After the opening of the year in 2024, Country Garden accelerated its "selling and selling" and sold five projects in Guangzhou in one breath, including Phoenix Hotel in Zengcheng District, Grade A office building in Country Garden Center in Zengcheng District, Yongwang Commercial Property in Country Garden Phoenix in Zengcheng District, Canglongfu Office Building in Country Garden in Panyu District, and Renhe Apartment Building in Baiyun District. The total price to be sold is 3.818 billion yuan.
In fact, since the thunder broke out in August 2023, Country Garden has been in full swing to exchange its high-quality assets for chips. Not only will the 26.67% equity of Guangzhou Asian Games Town Project be sold to China Shipping, with a total price of about 1.29 billion yuan. Then it signed an agreement with Wanda Commercial Management and Zhuhai Wanying to transfer its stake in Zhuhai Wanda Commercial Management at a price of 3.069 billion yuan.
In addition to opening the sale mode, in order to reduce costs and increase efficiency, salary reduction and layoffs are the only magic weapon for large enterprises. From the organizational structure, 14 regions are merged into 7, and the number of regions is always reduced from 206 at the peak to 21; The number of employees has been reduced from 69,932 to 58,140, with a reduction of more than 11,000; In addition, the monthly salary of executives with hundreds of millions of salaries will be reduced to 10,000 yuan.
However, Country Garden’s self-help behavior of "saving money" is a drop in the bucket in the face of the total debt of 1.4 trillion yuan.
Besides saving money, the most effective way to find money is to realize what Yang Huiyan called "guaranteed delivery", but it is not easy. According to the latest data released by the Central Finger Research Institute, in 2023, the total sales of "Top 100" real estate enterprises was 6,279.1 billion yuan, down nearly 20% year-on-year. Among them, the sales of Country Garden, which ended its "six consecutive championships", dropped directly from 464.30 billion yuan in 2022 to 219.98 billion yuan.
Not only that, the company’s contract sales showed a cliff-like decline. According to the announcement, the contracted sales amount of Country Garden in December 2023 was still 6.91 billion yuan, but by February 2024, the contracted sales amount of the company was only 3.72 billion yuan, which was far from the average monthly sales of nearly 30 billion yuan in the peak period.
In 2023, Country Garden delivered 600,000 suites, and the goal in 2024 is to exceed 480,000 suites. In Yang Huiyan’s words, "it is still the delivery task of a large number of days".
It can be said that as Evergrande, which has learned from the past, Country Garden can’t lie flat. "Resolutely not lying flat" is also the attitude that Country Garden conveys to the outside world, but waiting for the darkness before dawn is always long, and Country Garden can only suffer now.