Baoneng Units Make New Moves to Raise Capital and Shed Assets

Companies under the umbrella of Chinese property-and-financial services-turned-auto conglomerate Baoneng Group are raising capital and shedding assets as millions of yuan in outstanding debt are set to come due this year.

In the latest move, Foresea Life Insurance, Baoneng’s Shenzhen-based insurance unit, and another investment unit Shenzhen Jushenghua Co. Ltd., announced they would offload their holdings in property firm Shenzhen Overseas Chinese Town Co. Ltd. (000069.SZ), according to a Shenzhen Overseas’ filing (link in Chinese) on Saturday to the Shenzhen Stock Exchange.

Foresea and Jushenghua, which held a combined 8.98% of Shenzhen Overseas, plan to offload more than a fifth of their holdings (up to a combined 2%) in the shares within the next six months, according to the filing. If the sale goes as planned, the two companies could pocket around 1.6 billion yuan ($246 million), based on last week’s closing price of 9.7 yuan per share. The filing said the move reflected “the need for business development.”

Last week, Jushenghua announced (link in Chinese) plans to raise up to 3.8 billion yuan by issuing bonds on the Shanghai Stock Exchange. These carried a coupon rate of 7.5% and will be used to pay down the company’s debts, it said. This week it said that it ended up raising 1.5 billion yuan through the issuance, according to another statement (link in Chinese) on Monday.

Jushenghua’s interest-bearing debts continue to accumulate. At the end of September, Jushenghua had 86.4 billion yuan of interest-bearing debts, among which 19.9 billion yuan were short-term debts, according to public business records. That’s up from 61.2 billion yuan in such liabilities at the end of 2017, according to its bond prospectus (link in Chinese).

Jushenghua had 543.8 billion yuan in total assets and 443 billion in total liabilities at the end of last September, resulting in a debt-to-assets ratio of 81.5%, which was up three years in a row. Jushenghua said in the bond prospectus that the proceeds from its latest bond sales could “optimize the company’s liability structure and enhance its capability of repaying short-term debts.”

These latest cash-raising moves follow Foresea’s successful efforts during the second half of 2020 to sell shares worth hundreds of millions of yuan in Chinese medicine seller Dong-E-E-Jiao Co. Ltd. (000423.SZ), medicine manufacturer Zhejiang Huahai Pharmaceutical Co. Ltd. (600521.SH) and oil field equipment-maker Yantai Jereh Oilfield Services Group Co. Ltd. (002353.SZ).

A year ago, Baoneng bought out shareholders in Changan PSA, formerly associated with France’s PSA Peugeot Citroën, and renamed the company Shenzhen Baoneng Motor Co. Ltd.

Baoneng, led by 50-year-old billionaire businessman Yao Zhenhua, developed a reputation in 2015 as a corporate raider in a country where such tactics are rare after the company launched a hostile takeover attempt of major property developer China Vanke Co. Ltd. (000002.SZ).

The bid failed after regulators cracked down on the highly leveraged transactions using Baoneng subsidiaries against the de-facto state-controlled Vanke, and Baoneng was forced to offload its stake.

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Contact reporter Timmy Shen (hongmingshen@caixin.com) and editor Flynn Murphy (flynnmurphy@caixin.com)

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