(Yicai Global) Feb. 14 -- China Minsheng Investment Group plans to sell a large property development in Shanghai to Greenland Holdings as the investment giant takes steps to deal with its debt after missing a recent bond payment.
China Minsheng Investment will sell the Dongjiadu Financial City project in the city's West Bund area because of pressure to repay short-term debt, state-backed the Paper reported yesterday. It penned a framework deal with real estate titan Greenland before the Spring Festival, the report said, citing people familiar with the matter. Greenland will release further details in future, the report added.
The Shanghai-based investment group failed to pay CNY3 billion (USD443.3 million) worth of bonds that matured on Jan. 29. After that Shanghai's Financial Court froze its stakes in two real estate firms, China Minsheng Jiaye Investment and China Minsheng Bund Real Estate Development, valued at CNY13.2 billion, according to court filings dated Feb. 1.
"Quitting the Dongjiadu project is a step in corporate transformation," President Lv Benxian said in a report published today in Shanghai Securities News. The group is "communicating with potential domestic and foreign investors and will make important progress soon."
The group's net assets will be able to cover its debts and interest payments because many of the liabilities are passive and involve mergers and acquisitions, he added. China Minsheng Investment's debt ratio was 75 percent in the third quarter of last year.
The group will shift to an asset-light business model by gradually exiting the financial real estate and leasing sector to integrate its businesses in new energy and insurance, Lv said in December.
China Minsheng Investment, Shanghai Bund Investment Group and Shanghai Jiadu Properties together spent CNY24.9 billion (USD3.7 billion) for the West Bund plot in the nation's biggest land sales deal of 2014.
Short-term borrowings and other payables in current liabilities, as well as earlier noncurrent liabilities that are due in 12 months, account for a large proportion of China Minsheng Investment's debt, according to data from the Shanghai Clearing House. Last September, its liabilities were CNY232.8 billion, of which CNY39.8 billion is short-term borrowing, CNY21.4 billion is other payables and CNY43 billion represents noncurrent liabilities due within one year.
Founded in 2014, China Minsheng Investment focused on buying into sectors with overcapacity such as steel, shipbuilding and photovoltaics, with the aim of restructuring. But despite doubling its assets in about three years, net profit only gained about 21 percent to CNY5.6 billion in the first half of last year.
Editor: Emmi Laine