Caixin
Dec 12, 2020 04:50 AM
BUSINESS & TECH

Suning Appliance Vows to Repay $1.5 Billion of Bonds on Time

Shareholders of Suning Holdings Group Co. Ltd. pledged their stakes in the company to obtain a loan of undisclosed value.
Shareholders of Suning Holdings Group Co. Ltd. pledged their stakes in the company to obtain a loan of undisclosed value.

Suning Appliance Group Co. Ltd. will repay 10 billion yuan ($1.5 billion) of bonds on time as they come due next week, the Chinese home appliance retailing giant said Friday night. The company has been trying to convince bond investors that it wasn’t short on cash with billions of yuan more in debt maturing in the next few months.

The company issued the statement after the shareholders of its parent, Suning Holdings Group Co. Ltd., pledged their stakes in the company to obtain a loan of undisclosed value. It wasn’t clear whether proceeds of the loan would be used to repay the 10 billion yuan of bonds. Suning Holdings is owned by founder Zhang Jindong, his son Zhang Kangyang and a company jointly held by the two.

The financial moves aim to address concerns of a liquidity crunch swirling around Suning.com Co. Ltd., which sells home appliances online and in stores. Suning Appliance is the second-largest shareholder of Shenzhen-listed Suning.com with 20%, behind founder Zhang with 21%.

Following several bond defaults by state-owned companies, rumors emerged that Suning.com was running short on cash, leaving it in jeopardy of defaulting on its debt. After repaying the 10 billion yuan of bonds coming due Dec. 17, Suning Appliance has two bond issues totaling 10 billion yuan due in February and June, and it faces the buyback of an additional 1 billion yuan of bonds Dec. 13.

Moreover, the company’s business has been reeling. In the first three quarters this year, Suning.com’s net profit fell by 95% to 547 million yuan. By the end of September, it closed more than a quarter of its brick-and-mortar stores. The company had negative cash flow from operations since 2017, and it has maintained its cash levels mainly through borrowing, according to financial data provider Tonghuashun.

The prices of several Suning bonds fell more than 3% Wednesday, with the stock losing 4%. The company denied the cash-crunch rumors.

“Tens of billions of yuan of debts in bank loans (of Suning Appliance) will come due by Dec. 31 this year, so banks are quite nervous about it,” a source from China Minsheng Banking Corp. Ltd. said.

The owners of Suning Holdings borrowed the funds by pledging their stakes to Alibaba Group Holding Ltd.’s Taobao (China) Software Co. Ltd. unit, which also holds 20% of Suning.com, according to information (link in Chinese) published on the National Enterprise Credit Information Publicity System.

The shareholders registered the pledge Dec. 4, just as Suning.com made public that it was spending 3 billion yuan to buy back bonds to “shore up investor sentiment.”

Suning.com said late Thursday that Suning Holdings owns just 3.98% of the retailing giant’s shares. The company also said the equity pledge was just a regular business move for Suning Holdings and wouldn’t have any effect on Suning.com’s business.

As of the end of June, Suning Appliance had a bank credit line of 170.9 billion yuan, of which it tapped 129.4 billion yuan, according to data from Tonghuashun.

Suning.com has five bonds totaling 6.5 billion yuan due within a year. On Dec. 4, Suning.com said it would repay 1 billion yuan of debt coming due in January and February, according to a Suning.com filing (link in Chinese) with the Shenzhen Stock Exchange. The debts involve lenders such as Bank of China Ltd., BNP Paribas SA, Hang Seng Bank Ltd. and Agricultural Bank of China Ltd.

As of the end of September, Suning.com had total assets of 221.2 billion yuan and total liabilities of 136.1 billion yuan, according to its third-quarter report. The retailer had 30.8 billion yuan of liquid assets at the end of September, including 30 billion yuan of cash, but Suning.com can’t use its cash to repay debt of Suning Appliance as that would hurt the interests of other minor shareholders.

Suning.com has also brought in strategic investors to finance the e-commerce business of one of its subsidiaries. In November, it said that it secured 6 billion yuan to fund the operations of its new unit, Shenzhen Yunwangwandian Technology Co. Ltd., which develops e-commerce technology, according to a Nov. 30 filing.

Contact reporter Timmy Shen (hongmingshen@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com).

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