Caixin
Jul 21, 2021 07:40 PM
BUSINESS & TECH

Chipmaker Tsinghua Unigroup Starts Search for Strategic Investors to Fund Bankruptcy Restructuring

Tsinghua Unigroup is seeking strategic investors a forced into a bankruptcy restructuring. Photo: VCG
Tsinghua Unigroup is seeking strategic investors a forced into a bankruptcy restructuring. Photo: VCG

Chipmaker Tsinghua Unigroup Co. Ltd. is seeking strategic investors who can cope with its vast debt pile, as the state-owned firm is forced into a court-ordered bankruptcy restructuring.

These strategic investors should be capable of taking over Unigroup’s core chipmaking and cloud computing businesses, according to a Unigroup statement (link in Chinese) released Tuesday via the National Enterprise Bankruptcy Information Disclosure Platform, a website under the Supreme People’s Court.

On Friday, a Beijing court accepted a creditor’s application for Unigroup to undergo a reorganization under China’s bankruptcy law, with Huishang Bank citing the unpaid debts and doubtful repayment ability of the once acquisition-hungry highflyer.

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As part of the restructuring process, Unigroup is expected to attempt to reach an agreement with creditors for some of its debt to be forgiven and repayment deadlines to be delayed, while strategic investors will be invited to provide new funds. If the company, its creditors and potential strategic investors fail to reach agreement, the company could be liquidated.

Unigroup’s management team said in the statement that ideal investors should have held at least 50 billion yuan ($7.7 billion) in total assets in the previous year or 20 billion yuan in net assets attributable to shareholders, and they must have the ability to manage the businesses operated by Unigroup affiliates including Unisplendour Corp. Ltd. (000938.SZ) and Unigroup Guoxin Microelectronics Co. Ltd. (002049.SZ).

Some investors have already shown an interest in Unigroup’s better performing assets. E-commerce giant Alibaba Group Holding Ltd. and state-backed funds based in East China’s Zhejiang province are interested in Unigroup’s 46.45% stake in Unisplendour, which holds 51% of H3C Technologies Co. Ltd., a maker of servers and other digital products jointly run with Hewlett Packard, Caixin previously reported.

Qualified strategic investors should submit an investment plan by Sept. 25, according to the statement. Investors can get together into consortiums, but each group should have a leading investor, it added.

Over the past two years, the conglomerate backed by the prestigious Tsinghua University has defaulted on billions of U.S. dollars in both onshore and offshore bonds as its interest-bearing debt surged.

The companies’ financial collapse is the latest in a series of high-profile failures by major Chinese firms which borrowed huge amounts to fund global acquisition sprees in the past decade but fell into trouble amid slowing economic growth, poor management and regulators’ deleveraging campaign.

Once at the forefront of China’s drive to develop a domestic semiconductor industry, Unigroup embarked on a stream of acquisitions and investments into the capital-intensive chip sector between 2013 and 2019, forging partnerships with Intel Corp. and HP Inc. that saw it emerge as a major player during that time. But it failed to generate income quickly in an industry famous for huge costs of entry and long payback periods.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

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