Troubled Builder Jinke Seeks $467 Million to Support Bankruptcy Reorganization

Jinke Property Group Co. Ltd., a debt-heavy real estate developer based in Chongqing, China, has obtained 3.4 billion yuan ($467 million) from investors to aid in restructuring its substantial onshore liabilities totaling 86 billion yuan. This move is part of its strategy to finalize a bankruptcy reorganization plan [para. 1]. This makes Jinke the first major Chinese developer to undergo court-supervised debt restructuring, demonstrating the severe impact of China’s ongoing property crisis, which has driven numerous builders to the brink of insolvency [para. 2].

In April, the company received judicial approval to commence its bankruptcy reorganization, which requires submission of a restructuring plan by January [para. 3]. The proposed plan suggests cash payments up to 50,000 yuan per bondholder, with the remaining debt managed through a debt-to-equity exchange and a trust product. However, creditors are pessimistic, expecting repayment rates for general creditors to fall below 10% [para. 4]. Jinke faces a staggering 4,867 creditors with claims exceeding 86.2 billion yuan, dominated by secured debts and general debts [para. 5].

Despite efforts, Jinke continues to face challenges securing strong financial backing, needing "white knight" investors to stabilize its finances [para. 6]. The company's principal shareholder, Huang Hongyun, has been actively seeking investors to maintain control [para. 7]. On December 14, a consortium, comprising two local firms, agreed to offer 3.4 billion yuan in financial aid, with the majority consisting of a 2.6-billion-yuan investment supplemented by 750 million yuan in loans [para. 8].

Shanghai Pinqi Management Consulting Co., Ltd., a central player in this investment, is supported by notable figures such as Feng Lun of Vantone Real Estate and Ma Weihua, former president of China Merchants Bank [para. 9]. Another participant, Beijing Tianjiao Lvyuan Real Estate Development Co. Ltd., is owned by Wang Ping [para. 10]. However, insiders indicate that the total investment amount might require supplemental funds from financial investors [para. 11].

Jinke’s historical success included a significant market presence in Chongqing and a 2020 sales milestone of over 200 billion yuan. These achievements were overshadowed by a housing market downturn starting in late 2021, which strained its liquidity due to reliance on debt-fueled expansion [para. 12][para. 13]. Since early 2022, Jinke has been attempting to extend debt repayment deadlines but faced its first official default on a $325 million offshore bond by the end of the same year [para. 14]. As of September, the company reported total assets of 200.1 billion yuan but a net asset value of negative 1.88 billion yuan, alongside a significant loss [para. 15].

Jinke’s restructuring is poised to set a precedent for other indebted developers in China [para. 16]. Analysts predict a rise in bankruptcy and restructuring among property developers next year, given the considerable damage to their financial statements [para. 17]. Traditional methods of managing liabilities are proving insufficient in the current weak market environment [para. 18]. Jinke sees court restructuring as a means to alleviate liquidity risks, restructure debt, and eliminate underperforming assets, aiming for operational recovery [para. 19].

A successful restoration hinges on whether a company retains operational value, an attribute many residential-focused developers lack. Once homes are sold, such firms frequently lack the means to repay debts [para. 20]. Experts suggest that severely indebted developers without operational potential, like Evergrande Group, should enter liquidation while others, such as Country Garden, could leverage existing value to acquire new investment [para. 21].