Article | Dongli
On November 19, 2020, Shenyang ushered in the first snow this winter. A multi-party hearing organized by the Shenyang Intermediate People’s Court The meeting was also held on the same day.
The next day, a piece of paper kicked off the bankruptcy and reorganization of Brilliance Group.
On November 20, the Intermediate People’s Court of Shenyang City, Liaoning Province announced the civil ruling numbered (2020?) Liao?01?Poshen?27?, officially accepting the case of Gezhi Automotive Technology Co., Ltd. ( (hereinafter referred to as Gezhi Auto)'s reorganization application against Brilliance Automobile Holdings Group Co., Ltd. (hereinafter referred to as Brilliance Group).
The road to bankruptcy and reorganization of Brilliance Group has begun.
This Liaoning car company, whose history can be traced back to the state-owned Northeast Highway Administration Automobile Repair Plant in 1949, was the first Chinese car company to be listed on the New York Stock Exchange in the United States and the only year-old car company in Liaoning Province. The enterprise group with a revenue of over RMB 200 billion is also the first company to "eat crabs" after China liberalized foreign ownership ratio in the automobile industry.
It’s just that the glory of the past cannot cover up the current embarrassment.
On the day the court accepted the reorganization application, the China Securities Regulatory Commission issued an announcement stating that it had previously carried out a special inspection in accordance with the law. "Based on the inspection results, today we took administrative supervision measures to issue a warning letter to Brilliance Group and decided to It is being investigated for suspected violations of information disclosure, and the intermediaries involved in the bonds of Brilliance Group will be simultaneously checked, and relevant violations will be seriously investigated and punished. "
Although there are internal and external troubles, it is also a problem for Brilliance Group. It’s not the end of the world, but the road to recovery is doomed to be bumpy.
“Anyway, we should know internally that it is almost impossible to get it back.” A creditor sent new employees to Liaoning. An insider of the company told HD Auto Business Weekly that none of the old employees were willing to go. When new people come, it’s “just a symbolic push.”
This is not a move after the company's bankruptcy and reorganization, but it was psychologically prepared earlier.
When the epidemic hit, life for car companies was not easy, but Brilliance Group gave the market a "scare" when the industry was recovering: On October 23, Brilliance Group issued a 1 billion yuan The private placement bond "17 Huaqi 05" failed to be paid on time.
Although there were warning signs before, no one expected that Brilliance's debt default would come so quickly. After all, Brilliance Group is a state-owned enterprise, with 80% of its shares owned by the Liaoning State-owned Assets Supervision and Administration Commission and the other 20% owned by the Liaoning Provincial Social Security Fund Council.
On November 13, Brilliance Group’s creditor Gezhi Automobile applied to the Shenyang Intermediate People’s Court for bankruptcy reorganization of Brilliance Group.
One week later, the application was approved. Information released by the Shenyang Intermediate People's Court shows that "as of June 30, 2020, Brilliance Automobile Group Holdings Co., Ltd. has total assets of 45,966,931,336.90 yuan and total liabilities of 52,376,708,644.43 yuan."
Based on this, the court ruled that Brilliance Group’s assets were insufficient to pay off all debts, and it had the reasons for bankruptcy stipulated in the Enterprise Bankruptcy Law. But at the same time, the group has the value and possibility of saving, and the necessity and feasibility of restructuring.
According to Xinhua News Agency, before bankruptcy and reorganization, in order to solve the debt problem, relevant parties established the Brilliance Group Bank Debt Committee and tried to reconcile the debt, but failed.
After the bankruptcy and reorganization procedures are initiated, the Shenyang Intermediate People's Court will appoint the administrator of Brilliance Group, who will be fully responsible for all tasks during the company's bankruptcy and reorganization, including accepting and identifying creditor claims and preparing a draft reorganization plan. And submit it to the creditors meeting for voting, etc. Creditors will be paid according to a reorganization plan that is ultimately approved by the court.
What is worth pondering is that in September 2020, a company named Liaoning Xinrui Automobile Industry Development Co., Ltd. (hereinafter referred to as Liaoning Xinrui) was registered and established. Tianyancha data shows that the company is composed of Brilliance Group is 100% wholly-owned.
Subsequently, Brilliance Group adjusted the equity structure of Brilliance China and transferred 1.535 billion shares of Brilliance China to Liaoning Xinrui. Brilliance Group no longer directly holds shares of Brilliance China.
On November 5, Liaoning Xinrui signed an agreement with a third party to pledge its entire share capital of Brilliance China to the lender as collateral for loan financing. In this case, even if investors pursue debt or apply for bankruptcy and reorganization of Brilliance Group, they still cannot dispose of Brilliance China's equity.
China Bond Rating Co., Ltd. issued a statement stating, “This move further solidifies the company’s motivation to deliberately protect the assets of BMW Brilliance from creditors’ claims.”
“At that time We also hope to resolve this matter through arbitration application.” Employees of the aforementioned creditor company told HD Automotive Business Weekly that there is no good solution now, and they have not even entered the debt committee.
Of course, now that we have reached the stage of formulating a reorganization plan, creditors still need to compete with all parties on how to protect their rights and interests to the greatest extent.
Brilliance Group has long-term poor management, its own brands have been in a state of loss, and the debt ratio remains high. Since 2018, the Liaoning Provincial Government and relevant departments have been working hard to help Brilliance Group solve its cash flow problems, but its debt problems are difficult to recover from. The relevant person in charge of the State-owned Assets Supervision and Administration Commission of Liaoning Province said so.
This year, affected by the COVID-19 epidemic, the operating conditions of Brilliance Group’s independent brands have further deteriorated, and long-term accumulated debt problems have exploded.
In addition to the assets and liabilities disclosed above, Brilliance Group's 2020 bond semi-annual report shows that total assets are 193.325 billion yuan, total liabilities are 132.844 billion yuan, of which 52.48 billion yuan are notes payable and accounts payable, and short-term borrowings 16.521 billion yuan, and non-current liabilities due within one year are 5.394 billion yuan.
On the other hand, as of the first half of this year, excluding 16.758 billion yuan of restricted funds, Brilliance Group has 34.618 billion yuan of available funds on its books, which is difficult to cover the aforementioned liabilities.
On November 16, Brilliance Group announced that the company had defaulted on debts totaling 6.5 billion yuan and overdue interest totaling 144 million yuan. Due to the company's financial constraints, the renewal credit approval was not completed, resulting in the inability to repay.
But many people will find it strange that Brilliance Group has four listed companies, including Brilliance China Automotive Holdings Co., Ltd. (01114.HK) and Shanghai Shenhua Holdings Co., Ltd. (600653.SH) , Jinbei Automobile Co., Ltd. (600609.SH), Xinchen China Dynamics Holdings Co., Ltd. (01148.HK), as well as several major joint venture brands such as BMW Brilliance and Renault Brilliance, why are they still insolvent?
“This reorganization only involves the group’s own brand segment, and does not involve the group’s listed companies and joint ventures with BMW, Renault, etc. As BMW’s most important partner in China, after the group’s reorganization It is expected to achieve rebirth and do its best to recover the losses of creditors," said the relevant person in charge of Brilliance Group.
At the "17 China Automobile 05 Holders Meeting" on November 9, Brilliance Group stated that as the controlling shareholder of a listed company, it is not allowed to non-financially occupy the listed company's funds to repay debts.
In other words, although Brilliance Group is the parent company, it is an independent legal entity from its subsidiaries. The relevant debts involved cannot be transferred to the subsidiaries, nor can they use the funds of the subsidiaries to repay debts.
A lawyer specializing in capital markets told HD Automotive Business Weekly, “Brilliance Group is a typical example of a company with a strong subsidiary and a weak mother. The financial results on the parent company’s consolidated statements may look good, but the actual cash is not necessarily abundant. ."
The biggest manifestation of "Zi Qiang" is Brilliance's "BMW dependence". Brilliance Group's profits mainly rely on the listed company Brilliance China, and Brilliance China's biggest "profit cow" is BMW Brilliance.
In terms of sales volume, in 2019, Brilliance Auto Group sold 721,800 passenger cars, of which BMW Brilliance sold 545,900 units, accounting for more than 75%.
In terms of revenue, in 2019, Brilliance China's profit reached 6.762 billion yuan, of which BMW Brilliance contributed 7.626 billion yuan and other businesses suffered losses of 864 million yuan. In the first half of this year, Brilliance China's profit was 4.045 billion yuan, and the net profit provided by BMW Brilliance was 4.383 billion yuan. Other businesses still suffered losses.
However, the profits contributed by BMW Brilliance will be halved in 2022. Previously, Brilliance China has announced plans to transfer 25% of BMW Brilliance's equity to the BMW Group in 2022.
But similarly, Brilliance Group and Brilliance China can receive an equity transfer of 36 billion yuan (including interest), which can actually improve their solvency and reduce liquidity pressure.
China Bond Rating believes that although the company's main business losses are relatively serious, it still holds large amounts of high-quality assets, which can obtain liquidity through pledged loans, sales, etc. to repay debts.
However, before Brilliance transferred its equity to Liaoning Xinrui, the latter pledged all the equity to a third party. Many industry insiders pointed out that Brilliance Group deliberately pledged high-quality assets and did not obtain corresponding funds for debt repayment. , is an important reason for this breach of contract.
At the level of listed companies, the bankruptcy and reorganization of Brilliance Group did not have an impact. Instead, the four listed companies bucked the trend and rose. The Hong Kong stocks of Brilliance China and Xinchen China surged 8.25 and 7.46 respectively. Shenhua Holdings and Jinbei Automobile both hit daily limits.
"Around 2020, the automobile industry will face a process of restructuring." Chen Qingtai, chairman of the China Electric Vehicles Association of 100, previously said in an interview with the media that it will depend on which company has high-quality products and With high level and low cost, it can defeat its opponents, otherwise it will be eliminated.
In his view, "The market is ruthless. (Local) governments want companies to survive, but the market does not buy it."
For Brilliance Group, bankruptcy and reorganization are not It’s not necessarily a bad thing, this won’t be the end, maybe it’s a new starting point. After all, the key word in bankruptcy and reorganization is reorganization, not bankruptcy.
According to the "Enterprise Bankruptcy Law of the People's Republic of China", bankruptcy includes bankruptcy liquidation, reorganization and reconciliation. Simply put, bankruptcy liquidation can be understood as the closure of a company, the sale of assets to pay debts, and the company will no longer operate, while reorganization and reconciliation means that the debtor holds the assets and business activities continue to operate.
In November 2020, the bankruptcy and reorganization case of Northeast Special Steel was recognized by the Supreme People's Court. The Dalian Intermediate People's Court pointed out that since Northeast Special Steel was approved for reorganization on August 11, 2017, Shagang was introduced Later, production and operation performance steadily recovered, the company turned losses into profits, and gained market recognition.
Similar to the bankruptcy and reorganization of Brilliance Group this time, the listed company Fushun Special Steel, a high-quality subsidiary of Northeast Special Steel, was not within the scope of its bankruptcy and reorganization.
It must be said that the reorganization of Brilliance Group, also in the Northeast, has a relatively worthy case.
So, can Brilliance be able to introduce peers like Shagang to improve its technical level like Northeast Special Steel? It is not easy in the domestic automobile industry.
Due to local factors, China's automobile companies have mainly focused on strategic cooperation in the past two years, and no large-scale mergers and reorganizations have occurred. In the face of market competition, whether Brilliance Group and its supporters have the courage to carry out real capital-level changes and deepen the mixed-ownership reform.
"Creditors should be more involved in corporate governance." Wu Gangliang, a researcher at the China Enterprise Reform and Development Research Association, said in an interview with "Travel Yike" that "state-owned enterprise beliefs" must be broken. The government should no longer endorse the debt of state-owned enterprises.
On the other hand, Brilliance still needs to be self-reliant.
According to the aforementioned statement of Brilliance Group, the reorganization only involves the group’s independent brand sector and does not involve listed companies and joint venture brands. In addition to these high-quality assets, the company did not directly respond to HD Automotive Business Weekly as to what other businesses Brilliance Group can finance.
Can Brilliance Group attract high-quality and suitable new investors through its own brand assets? Data shows that in the first half of 2020, "Brilliance China" and "Brilliance Jinbei" sold 4,937 vehicles and 6,845 vehicles respectively, with sales declining sharply year-on-year.
It is not difficult to see that this part of the assets is not of high quality, and subsequent reorganization will test the abilities of managers and creditors.
However, it is urgent to enhance the competitiveness of independent brands.
BMW Brilliance, which has always been a cash cow, can only provide a profit of 25% starting from 2022. To make matters worse, according to Automobile Commune, a person from the Xushui Branch of Great Wall Motor Co., Ltd. disclosed that the chassis Business news shows that the BMW 3 Series production line is being laid, and mass production SOP (Start Of Production) is expected to begin in 2024.
BMW has Great Wall as an alternative, and Brilliance can no longer hope to make money lying around.
In such an era of change, the key is to find the right position. During the epidemic, Wuling became an instant hit by manufacturing Hongguang MINI EV. Can Brilliance's independent brand learn from Wuling and find a path of its own?
Managers of Brilliance Group must realize that the most important wealth that bankruptcy and reorganization brings to the company is by no means a reason or excuse to get rid of the burden of debt. The most important thing is to find a direction and adjust strategies. opportunity.
During the financial crisis, General Motors and Chrysler sought bankruptcy protection, but Ford survived. But Hackett, the former CEO of Ford Motor Company, once lamented that "competitors who emerged from bankruptcy were stronger and more adaptable. Bankruptcy forced them to redesign their companies, but Ford did not make enough changes."
Brilliance will not bid farewell to the stage of history. This Northeastern auto company that has lost its glory will have to go through many hardships if it wants to make a comeback. Time will tell whether it can successfully achieve nirvana.
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This article comes from the author of Autohome Chejiahao and does not represent the views and positions of Autohome.