It has been a stormy weather for China’s property sector to survive and thrive, Huarong performed better and reported to gain profit. The company has a clear valuation and strategic model to calm down the market volatility. Under its acquire and restructure model, the company has distressed assets for as much as Rmb802.1bn where Rmb310.9bn were held.
The company was sure that this model had helped the company with bailouts of large entities and divestments of units of state-owned enterprises. Plus it had acquired defaulted bonds. The company has contributed to the merger and reorganization of high-quality projects of problematic real estate companies. Plues, it enabled construction to work on the unfinished property projects.
From the 2021 records, the company exited as many as 1.6 times on selling stakes in companies acquired through debt-to-equity swaps. It was an improvement because a year before their exit time was 1.3. Also in 2021, the company acquired distressed asset packages of Rmb77.9bn and implemented 93 restructuring packages.
The company’s subsidiary also faced problems. Huarong Rongde, a special situations business investing in debt, equity or mezzanine capital of companies encountered short-term liquidity issues. It plunged to a net loss as much as Rmb661.6m. This was critical compared to a Rmb411.2m profit a year before.
Questioned about the past, Huarong AMC argued that the problems should be understandable due to the deterioration of operating and financial conditions of some real estate enterprise customers. This led to the reduced performance ability. Therefore, Huarong Rongde faced a large credit impairment loss.
Besides the situation, China’s Ministry of Finance has sold a 3% stake in Huarong AMC to state-owned conglomerate Citic Group. It marks the largest shareholder Citic could make at 26.46% stake ahead of the MoF’s 24.76% shareholding.
