Liaoning 190 billion-level well-known state-owned enterprise bankruptcy and reorganization
On November 20, the Shenyang Intermediate People’s Court ruled on the 20th to accept the creditor’s application for reorganization of Brilliance Automobile Group Holdings Co., Ltd. (hereinafter referred to as Brilliance Group), marking that this automobile company has officially entered the bankruptcy reorganization process.
The court’s ruling stated that Brilliance Group has insufficient assets to pay off all its debts, and it has bankruptcy reasons stipulated in the Corporate Bankruptcy Law. But at the same time, the group has the value and possibility of salvation, and the necessity and feasibility of reorganization.
According to the law, the Shenyang Intermediate People’s Court will appoint the manager of Brilliance Group to be solely responsible for all tasks during the bankruptcy and reorganization of the enterprise, including accepting and identifying creditors’ claims, preparing a draft reorganization plan and submitting it to the creditors Meeting voting, etc. The creditors will be paid according to the reorganization plan finally approved by the court.
The person in charge of Brilliance Group stated that this reorganization only involves the self-owned brand sector of the group’s headquarters, and does not involve the group’s listed companies and BMW, Renault and other joint ventures. As BMW’s most important partner in China, the group is expected to achieve a rebirth after the reorganization and do its utmost to recover the losses of creditors. At the same time, BMW Brilliance is still a stable source of profits in the future, and it will continue to launch new products and expand its scale.
After the news was announced, the Hong Kong stock Brilliance China once expanded to 10%in the afternoon, with the stock price as high as 7.66 Hong Kong dollars.
As a state-owned enterprise in Liaoning Province, Brilliance Group directly or indirectly controls and participates in four listed companies, and through its listed company Brilliance China and BMW jointly established BrillianceBMW Company. There are three independent brands of Zhonghua, Jinbei and Huasong, and two joint venture brands of BMW Brilliance and Renault Brilliance.
Brilliance Group is the oldest automobile manufacturer in China. Its history can be traced back to the state-owned Northeast Highway Administration Automobile Repair Factory established in 1949. In 1959, the renamed Shenyang Automobile Manufacturing Plant successfully trial-produced five”Julong” trucks. Established in the early 1990s, Brilliance Auto, listed on the New York Stock Exchange as early as October 1992, was the first domestic company to go to Wall Street to raise funds.
Why did the veteran car manufacturer and the first stock of China Concept fall?
According to the person in charge of the State-owned Assets Supervision and Administration Commission of Liaoning Province, Brilliance Group’s long-term management is poor, its own brands have been at a loss, and the debt ratio remains high. Since 2018, the Liaoning Provincial Government and relevant departments have been working hard to help Brilliance Group solve its cash flow problems, but its debt problems have been accumulated.
According to relevant media reports, China Automotive, the largest independent brand of Brilliance, was once the pride of China’s local automakers. After the suspension of production of Hongqi, Zhonghua Automobile has attracted attention from home and abroad since its launch in 2002. A”Greater China” can be purchased for about 200,000 yuan. Many urban white-collar workers and official vehicles choose it. Even in 2010, when the brand went down, it could still become a taxi model in Guangzhou. However, during the period from 2010 to 2020 when the local car companies are developing, China Motors has completely fallen into it, with monthly sales of only three digits.
And the high-end brand created by Brilliance Auto-Huasong. Since the establishment of the brand in 2015, Huasson has only one model to compete in the market, Huason 7. The performance of this MPV, which focuses on high-end business positioning, has always been on the edge after its listing. Jiemian News checked the sales data and found that Huasong 7 had a cumulative sales of 4,500 units in 2016, and a cumulative sales of 3,000 units in 2017. After that, the sales volume decreased year by year, and sales were close to zero. Since Huasong 7 went public, there has been a peak of monthly sales of more than 4,000 vehicles at the end of 2015, but according to industry insiders, the sales are not private car sales, but bulk purchases by leasing companies and major customers. Jiemian News found that Brilliance has indeed established Huasong 7 business leasing company, investing about 20,000 vehicles in 11 central cities and 4 major cities across the country, hoping to open the market through leasing. And if you exclude the orders from major customers and just look at the market performance, in fact, Huasong 7 had zero sales for the first time in July 2015 shortly after its launch. In the end, Huasong returned unfailingly.
This year, affected by the new crown pneumonia epidemic, the operating conditions of Brilliance Group’s own brands have further deteriorated, and long-term accumulated debt problems have exploded. According to the semi-annual report of Brilliance Group this year, the total liabilities at the group level are 52.376 billion yuan, and the debt-to-asset ratio exceeds 110%, and it has lost financing ability. In order to solve the debt problem, the relevant parties established the Brilliance Group Bank Debt Committee to seek debt reconciliation, but failed.
In late October, the 1 billion yuan private placement bond issued by Brilliance Group paid only interest when maturity, and the principal failed to be paid, causing concern.
On November 3, the Shanghai Stock Exchange issued an announcement stating that Brilliance Auto failed to disclose in a timely manner the company’s self-discipline management measures that were criticized by the Exchange on August 21, 2020; it failed to discuss the company’s liquidity risk , Failed to repay the principal and interest funds of 17 Huaqi 05 in full and on time to perform information disclosure obligations in a timely manner and provide risk warnings; fail to fully disclose and respond to major market rumors about the establishment of a creditor committee by the bank to co-ordinate the handling of the company’s debt issues, layoffs and shutdowns of some of the company’s factories And other matters. The above behavior violated relevant regulations, and the Shanghai Stock Exchange issued a written warning to the company.
Brilliance Automobile Group subsequently announced that”17 Huaqi 05″ failed to pay the bond principal and interest on time due to the company’s tight funds. After the company’s efforts to raise funds, the interest of the aforementioned bonds will be paid from October 23, 2019 to October 22, 2020 on November 5.
On November 13, a creditor filed an application for bankruptcy and reorganization of Brilliance Group.
On November 16, Brilliance Group announced that at present, Brilliance Group has constituted a total debt default amount of 6.5 billion yuan and a total amount of overdue interest of 144 million yuan. Due to the shortage of corporate funds, the renewal credit approval has not been completed, resulting in failure to repay. The debt default has had an impact on the production and operation of Brilliance Group’s headquarters, resulting in a deterioration in the financial situation and greatly affecting the solvency.
Currently, Brilliance Group has 6 complete vehicle manufacturers, 2 engine manufacturers and a number of component manufacturers in Liaoning, Sichuan and Chongqing; it has 4 listed companies (Brilliance China Automotive Holdings Co., Ltd. Company, Shanghai Shenhua Holdings Co., Ltd., Jinbei Automobile Co., Ltd., Xinchen China Power Holdings Co., Ltd.), more than 160 wholly-owned, Holding and participating companies, and establishing overseas KD factories in many countries along the “Belt and Road”. It has 47,000 employees and total assets of more than 190 billion yuan.
How to bankruptcy and reorganization is a difficult problem facing Brilliance Auto.
Source:Daguan News Comprehensive Xinhua News Agency, Jiemian News, Daily Economic News, People’s Daily
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