Baoneng auto unit defaults on $ 434 million trust loan
Shenzhen-based Baoneng Investment Group missed paying off another debt to fund its unrealized car-building dream, underscoring the worsening capital crisis of the once-high-flying private conglomerate.
Baoneng Motors Group, the automotive unit of Baoneng, failed to pay interest on a 2.8 billion yuan ($ 434 million) trust loan to finance a new energy vehicle (NEV) industrial park project in Guangzhou, revealed the state-backed China Railway Trust. Baoneng and its majority shareholder, Yao Zhenhua, have offered guarantees for the product.
The loan was issued in May 2020 with a maturity of 15 months. He raised funds to develop Baoneng’s NEV project, which started in 2017 but has made little progress.
Baoneng, a private property and financial services company, is the latest Chinese conglomerate to face a massive debt crisis. The company is best known for the failed 2015 hostile takeover attempt of large real estate developer China Vanke.
Baoneng’s capital crunch came to light around the start of the year. With 200 billion yuan in debt, Baoneng faces employees demanding unpaid wages, suppliers claiming late payments, and creditors seeking to repay their loans.
China Railway said a Chengdu court ordered the freezing of certain Baoneng assets – including land use rights, properties, stocks and guarantor accounts – to recover losses due to default .
Last month, Shandong International Trust said Baoneng Motors had not paid 67.5 million yuan in interest on the debt. Chongqing International Trust declared a default related to Baoneng on 2.2 billion yuan and Shanghai AJ Trust on 518 million yuan.
Other trust companies also face risk on loans to Baoneng Motors, including Sino-Australian International Trust, Zhongrong International Trust, Cofco Trust and AVIC Trust.
Yao, 51, founder and chairman of Baoneng, launched Baoneng Motors in 2017 with registered capital of 1 billion yuan. In the same year, the auto unit acquired a 51% stake in Qoros Auto, a small car manufacturer based in Shanghai, for 6.5 billion yuan. A year later, Baoneng spent an additional 1.56 billion yuan to increase its stake in Qoros to 63%.
In 2019, Baoneng took over French automaker PSA’s joint venture with Changan Automobile. Changan revealed that he sold his 50% stake in the joint venture to Baoneng for 1.63 billion yuan. PSA has not disclosed the value of its deal with Baoneng. Yao has pledged to invest 10 billion yuan per year over the five years starting from 2018 to develop new vehicles and launch 26 models by 2022.
Between 2017 and 2020, Baoneng Motors spent 869 million yuan to acquire 1 million square meters of land in Guangzhou for the NEV industrial park project. But the land has largely remained inactive, and Baoneng Motors has not produced a single car so far. Guangzhou Industrial Park has secured billions of yuan in financing through issuance of fiat products.
In June, Baoneng said that the Guangzhou government had agreed to provide 12 billion yuan of strategic investment to Baoneng Motors as a bailout. Caixin learned that only 2.4 billion yuan from the investment fund had arrived in Baoneng in early September.
As of September 2021, courts across China have issued 12 enforcement orders against Baoneng for debt disputes over more than 17.6 billion yuan, according to public records. The company’s capital crunch has also raised concerns in the bond market.
Shenzhen Jushenghua, Baoneng’s main subsidiary and main financing platform, has 14 bonds outstanding totaling 11.7 billion yuan. Shenzhen Shum Yip Logistics Group Holdings, another financing arm of Baoneng, holds five outstanding 9 billion yuan bonds, according to market data.
According to Dagong Global Credit Rating, Jushenghua defaulted on a 1.59 billion yuan bond on September 30, with the next 410 million yuan bond maturing on October 22.
Starting in the second half of 2020, Baoneng has attempted to repay its debt by selling assets, but has few that can quickly generate cash.
“All of its land and office buildings have been used to secure loans, and interest rates are not low,” said a person familiar with the matter. The only liquid assets are Baoneng’s holdings of shares of listed companies.
As of the second half of 2020, Qian Hai Life Insurance, another main subsidiary of Baoneng, has unloaded more than 370 million publicly traded shares.
Denise Jia contributed to this story.
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