Jinke Co., Ltd.: A Postponed Rebirth
The recent developments surrounding *ST Jin Ke, a prominent player in China's real estate market, have captured considerable attention. In a strategic move, the company has extended the deadline for submitting its restructuring investment plan by three months, following judicial procedures aimed at addressing significant workloads. This extension allows the management to gather ample information and develop a robust framework for potential investors, who now have until November 8 to submit their proposals.
Being the first major real estate enterprise in China to proactively initiate its restructuring, *ST Jin Ke has been making swift progress since its court application was accepted in April. However, the company finds itself at a pivotal juncture, where the outcome of the restructuring plan, particularly its approval from creditors and subsequent court ruling, remains uncertain as we approach the fourth quarter.
The management has articulated its hopefulness regarding this restructuring process, emphasizing that a successful plan would significantly alleviate financial pressures and restore investor confidence. Nevertheless, the company now faces the challenging task of patiently waiting for the results.
Advertisement
The cautious yet positive tone of the announcement made on October 16 reflects the company's serious commitment to its restructuring process. Through a civil ruling from the Chongqing Fifth Intermediate People's Court, it was confirmed that the submission deadline for the restructuring draft for both *ST Jin Ke and its wholly-owned subsidiary, Chongqing Jin Ke, has been extended to January 22 of the following year.
This three-month extension, rather than being viewed negatively, can be seen as a constructive opportunity. Initial feedback from potential investors indicated that the breadth of projects under the company, combined with its substantial debt scale, presented a formidable task for due diligence and internal decision-making. Many have asked for additional time to ensure their proposals are comprehensive and beneficial.
In its communication with the court, the company highlighted its priority of protecting the interests of minority shareholders and creditors while securing a more favorable restructuring outcome. Furthermore, the management has moved the deadline for investors to submit their restructuring investment proposals to November 8, showcasing an eagerness to attract viable partners.
The rapid pace of *ST Jin Ke's restructuring process is notable, especially given the challenges faced by other firms in the sector. Following the court's acceptance of its application in April, the company convened its first creditors' meeting in July, where several proposals were successfully approved.
As of mid-August, the management received formal registration materials from twelve interested restructuring investors, with nine having successfully deposited their guarantees. Earlier in July, the company assured investors that it was fully cooperating with the management to expedite the restructuring process, with completion targeted for the fourth quarter of 2024.
Despite these efforts, *ST Jin Ke remains buried under a mountain of debts and legal disputes. The company revealed on October 14 that, alongside previously disclosed litigation, additional claims and arbitrations amounting to 800 million yuan have emerged, representing approximately 22.81% of its latest audited net assets. A significant portion of these disputes stem from financial borrowing agreements, construction contracts, and housing sales contracts.
This situation is dire, as *ST Jin Ke's mid-2024 interim report indicated issues beyond just these recent developments. The report cited a staggering total of 18.1 billion yuan in litigation claims over the past year alone, significantly eclipsing the company's net asset base. With 178 billion yuan of liabilities tied to ongoing cases where the company or its subsidiaries are defendants, it is evident that the magnitude of these issues is overwhelming.
As these legal matters drag on, the company hopes that improving cash flow from operations will enhance its ability to settle disputes and recover a sense of financial stability. In the first half of this year, *ST Jin Ke reported revenues of 16.05 billion yuan, but its net profits plummeted by 95.96% to a loss of 3.8 billion yuan compared to last year.
This downturn aligns with broader industry trends, as China’s real estate market faces unprecedented challenges, leading to a sharp decline in sales. The company’s reliance on property sales took a hit, with revenues from this sector totalling only 15.77 billion yuan—down 38.24% from the previous year.
As of June 30, *ST Jin Ke's cash reserves stood at 4.596 billion yuan, including a portion classified as restricted funds. The company's accumulated interest-bearing debt has reached a staggering 71.4 billion yuan, with a notable 31.8 billion yuan overdue. Short-term loans and other liabilities have become increasingly troublesome, exacerbating the company's financial plight.
Once hailed as a kingpin in the industry, little over a decade ago, *ST Jin Ke's founder Huang Hongyun led the company through a remarkable growth phase after establishing it in the late 1990s. The rapid urban development of Chongqing and favorable policies allowed the company to expand aggressively, attaining sales surpassing 134.48 billion yuan by 2011 and breaching the 1 trillion yuan milestone seven years later. During its peak, Huang was recognized among the world's wealthiest individuals, finding his family’s wealth placed prominently on the Forbes list. However, that success marked a turning point for *ST Jin Ke.
As the company faced a staggering loss of 21.39 billion yuan in 2022—a drop of nearly 694.13% year-on-year—and followed up with an additional loss of 8.73 billion yuan in 2023, the tide has certainly turned for *ST Jin Ke. It joins the ranks of other formidable names in the industry, like Xiexin and Di Ma, which have also been unable to escape liquidity crises, despite asset sales aimed at improving their standing.
Throughout 2024, the climate appears bleak for many firms, with the management team collectively tightening their belts. Reports indicate that the core management's pre-tax compensation saw a 47% reduction, with overall operational costs dropping significantly. Nonetheless, the recent adjustments in real estate policies and the accelerated restructuring plan may provide *ST Jin Ke with a potential rebound opportunity.
As of June this year, the total sellable resources held by the company and its investment ventures approached 48.53 million square meters, reinforcing the possibility of recovery. Given this substantial inventory, there's hope yet for *ST Jin Ke to navigate these treacherous waters and emerge renewed.
Leave a comment