The crisis of the Eastern Group has worsened, and whether the 10 billion loan of Minsheng Bank can be recovered

Blue Whale Finance

2024-06-22 18:26Posted on the official account of Beijing Blue Whale Finance

Blue Whale News, June 22 (Reporter Wang Jianwen) Oriental Group, which has limited deposit withdrawals of more than 1.6 billion yuan, has once again been pushed to the forefront.

On the evening of June 21, Oriental Group announced that due to debt default and the decline in the company's stock price, 0.63% of the company's shares held by the company's major shareholder Oriental Runlan were forced to liquidate. On the same day, Oriental Group was filed by the China Securities Regulatory Commission (CSRC) for failing to disclose information on a related party transaction in 2022.

As an important shareholder of Minsheng Bank, Oriental Group and Minsheng Bank have frequent transactions. As the company's crisis fermented, whether its nearly 10 billion loans in Minsheng Bank could be repaid on time has also attracted attention.

Since June 19, the company's stock price has fallen sharply for 3 consecutive trading days, with a cumulative decline of 25.93%. As of the close of trading on June 21, the company's share price closed at 1.00 yuan per share, with a total market value of only 3.7 billion yuan. If the company's share price continues to fall, the company is likely to face the risk of delisting.

The crisis of major shareholders is further fermenting, and there is a risk of delisting of Oriental Group?

Oriental Group is one of the most important listing platforms of the "Oriental Department", and behind the "Oriental Department" is Zhang Hongwei, the former richest man in Northeast China.

In the seventies of the twentieth century, Zhang Hongwei also served as a "contractor" in Harbin, and as the business became bigger and bigger, in 1984, he established Harbin Oriental Construction Company, which was later renamed Oriental Group, and was successfully listed in 1994, and has been 30 years now. In the Forbes list of China's richest people in the same year, Sun Hongwei ranked second, second only to Liu Yonghao's brothers, and became the "richest man in Northeast China" at that time.

After the listing of Oriental Group, Sun Hongwei also began to make frequent moves in the capital market, and his capital territory continued to expand. According to the official website of Oriental Co., Ltd., the controlling shareholder of Oriental Group, the company currently participates in the holding of four listed companies: Oriental Group, United Energy, Minsheng Bank and Jinzhou Port.

But for now, Zhang Hongwei and his "Oriental Department" have fallen into a debt spiral. According to the announcement of Oriental Group, in 2023, the operating income of Oriental Limited will be 70.118 billion yuan and the net loss will be 4.830 billion yuan. As of the end of 2023, the company's asset-liability ratio is as high as 71.12%, and the total bank loans alone are as high as 23.407 billion yuan.

In May this year, Oriental Group announced that a working capital loan of 454 million yuan of Oriental Co., Ltd. in the Longteng branch of Harbin Longjiang Bank was overdue. In addition, according to the company's announcement on the evening of June 21, due to the default of debts and the continuous decline in stock prices, CITIC Securities forced the liquidation of some shares of the company's major shareholder Dongfang Runlan, and passively reduced its shares accounting for 0.63% of the company's total share capital.

After the liquidation, Zhang Hongwei, Oriental Co., Ltd. and their wholly-owned subsidiaries acted in concert, and their total shareholding in the company decreased to 29.79%.

In addition, Zhang Hongwei and his concerted actors also pledged a large proportion of the shares of the Oriental Group. As of May 24 this year, Zhang Hongwei and his concerted actors held a total of 30.42% of the company's shares, of which 81.20% were pledged, and the number of pledged shares accounted for 24.70% of the company's total share capital.

In view of the poor financial situation of the major shareholders, after the Oriental Group disclosed on June 18 that the withdrawal of 1.64 billion yuan of deposits was restricted, the Shanghai Stock Exchange required the company to explain whether the relevant funds were misappropriated by the controlling shareholder and related parties, and whether it constituted the occupation of non-operating funds. The company is also required to sort out the business, capital transactions and guarantees with the controlling shareholder and related parties, and self-check whether there are problems such as capital occupation and illegal guarantees.

After the financial explosion, investor confidence was damaged, and the company's stock price continued to fall. According to the Stock Listing Rules of the Shanghai and Shenzhen Stock Exchanges, if the daily closing price of a stock is less than RMB1 for 20 consecutive trading days, the trading delisting indicator will be triggered. As of the close of trading on June 21, the share price of Oriental Group has fallen to 1 yuan per share, and if the company's stock price continues to fall in the future, there may be a risk of delisting.

In addition, according to the new delisting regulations issued in April this year, listed companies that are occupied by the controlling shareholder and its related parties for non-operational purposes, with a balance of more than 30% of its net assets or an amount of more than 200 million yuan, and are ordered to make corrections by the CSRC but fail to do so on time, will be delisted after suspension and "ST".

If the withdrawal of deposits of Oriental Group is restricted and it is finally confirmed that there are non-operating funds occupied, the company will also have the risk of delisting.

Will the crisis in the East implicate Minsheng Bank's tens of billions of loans?

The Eastern Bloc itself lacks hematopoietic capacity.

From the business point of view, in recent years, the growth of the grain, oil and food business of Oriental Group has been sluggish, and the company's real estate business has suffered serious losses under the recession of the real estate industry. Affected by this, in recent years, the company's revenue has continued to decline and continues to be in a state of loss. From 2021 to 2023, the company's operating income will be 13.729 billion yuan, 11.265 billion yuan, and 6.081 billion yuan respectively; The net loss attributable to the parent company was 1.719 billion yuan, 996 million yuan and 1.557 billion yuan respectively.

At the same time, there is also significant liquidity pressure in the Eastern Bloc. As of the end of 2023, the company's monetary fund book balance was 3.179 billion yuan, of which 557 million yuan was restricted. During the same period, the company's short-term borrowings were 8.157 billion yuan, and the balance of non-current liabilities due within one year was 5.257 billion yuan, which was much larger than the cash on hand.

Against this backdrop, the liquidity of financial companies under the control of controlling shareholders has tightened, making the situation of the Eastern Group even worse. On the evening of June 18, Oriental Group suddenly announced that the company had recently received a reply from Oriental Finance Company, due to the company's recent temporary tightening of liquidity, the company and its subsidiaries in Oriental Finance Company's 1.64 billion yuan of deposits were restricted from large withdrawals.

Although Oriental Co., Ltd. and Zhang Hongwei urgently issued a "Letter of Commitment" the next day, stating that they would withdraw funds through the disposal of assets such as United Energy and UEP Wind Energy to help solve the liquidity problem of Oriental Finance Company and ensure the safety of Oriental Group's funds. However, according to the announcement, the above arrangements will be completed in the next 3-6 months, and will not immediately solve the problems faced by the Eastern Bloc.

With the sharp increase in liquidity pressure on the Eastern Group, Minsheng Bank, which has a close relationship with the company, may also face risks.

As an important shareholder of Minsheng Bank, as of the end of the first quarter of 2024, Oriental Group held a total of 2.92% of the equity of Minsheng Bank. Zhang Hongwei also serves as the vice chairman of Minsheng Bank. As a result, a large amount of the borrowing needs of the Eastern Group are met by Minsheng Bank. According to the annual report of Minsheng Bank, as of the end of 2023, the balance of loans of Oriental Group at its place was as high as 9.599 billion yuan.

As the first national commercial bank established by private capital in China, Minsheng Bank has a deep relationship with the capital family. In addition to Zhang Hongwei's "Oriental Department", Lu Zhiqiang's "Oceanwide Department" and Liu Yonghao's "New Hope Department" are all important shareholders of the company.

Similar to the "Oriental Department", the "Oceanwide Department" also borrows a large amount of money from Minsheng Bank every year. As of the end of 2023, Oceanwide Holdings' loan balance in Minsheng Bank is still as high as 18.726 billion yuan. However, with the thunderstorm of the "Oceanwide System", Minsheng Bank also had to collect debts from shareholders.

In October 2023, Minsheng Bank announced that after the first-instance judgment, Wuhan Central Company, a subsidiary of Oceanwide Holdings, should repay a loan of 3.046 billion yuan to Minsheng Bank and the corresponding interest, overdue penalty interest and compound interest. In May this year, Minsheng Bank once again sued Oceanwide Holdings and its subsidiaries, claiming 4.266 billion yuan of loan principal and 1.2 billion yuan of interest.

Regarding whether the deposit thunderstorm incident of the Oriental Group will have an impact on the company, the Blue Whale financial reporter also called Minsheng Bank for verification, but did not receive a response as of press time.