Can the former "richest man in the Northeast" save the "Oriental Department"?

"Investor Network" Ge Fanmei

Zhang Hongwei, the former "richest man in Northeast China", is dealing with the liquidity crisis faced by the "Oriental Department" by selling assets.

On June 26, a paper on the Eastern Bloc (600811. SH) was applied for reorganization by creditors, which undoubtedly exposed the financial risks of Zhang Hongwei and his "Oriental Department".

According to the risk warning, there is uncertainty as to whether the reorganization application can be accepted by the court and whether Oriental Group will enter the reorganization procedure in the future. If the company's reorganization fails, there will be a risk of being declared bankrupt, and the company's shares will face the risk of being terminated from listing.

In the secondary market, as of June 26, 2024, the closing price of Oriental Group's shares was 0.81 yuan per share, and the closing price has been lower than 1 yuan for 3 consecutive trading days, and if the stock price is lower than 1 yuan for 20 consecutive trading days, the company may face forced delisting of trading. At present, the total market value of the company is 2.964 billion yuan.

Facing a restructuring crisis

On June 26, Zhang Hongwei's "Oriental Department" flagship company, Oriental Group, announced that on June 25, 2024, Oriental Group received a "Notification Letter" from the creditor Heilongjiang Donghui Construction Engineering Co., Ltd. (hereinafter referred to as "Donghui Company"), because the company failed to pay off the due debts of Donghui Company, obviously lacked solvency but had a certain reorganization value, Donghui Company had submitted materials to the Harbin Intermediate People's Court to apply for the reorganization of the company.

According to the announcement, the legal person of the applicant Donghui Company is Liu Yuxiao, with a registered capital of 60 million yuan. The applicant is the contractor of the renovation project and interior decoration project of Harbin Oriental Building of Oriental Group, and the company has yet to pay the remaining project amount of 752,300 yuan to the applicant.

As early as June 18, the old "agricultural giant" of Oriental Group blew up its financial pressure and issued an announcement saying that due to the temporary tightening of liquidity of Oriental Finance Company recently, Oriental Group and its subsidiaries have restricted large withdrawals of 1.64 billion yuan in deposits of Oriental Finance Company.

In this regard, the Shanghai Stock Exchange quickly issued a regulatory letter, requiring Oriental Group to self-examine the deposit and use of deposits in the financial company, whether the relevant funds were misappropriated by the controlling shareholder and related parties, whether it constituted the occupation of non-operating funds, and whether the disclosure of information in the early stage was true, accurate and complete.

On the evening of June 19, Oriental Group Co., Ltd. (hereinafter referred to as "Oriental Co., Ltd."), the controlling shareholder of Oriental Group, and Zhang Hongwei, the actual controller, urgently issued a "Letter of Commitment", promising to repay the money from the sale of assets and ensure the safety of the deposits of the listed company. Specific measures include the disposal of assets such as the equity of United Energy and UEP Wind Energy to recoup funds and help solve the liquidity problem of Dongfang Financial Company.

On June 26, Oriental Group said that if the court accepts the company's reorganization application, the company will actively cooperate with the reorganization work. If the company can successfully implement the reorganization and complete the implementation of the reorganization plan, it will help the company optimize the asset-liability structure, divest inefficient assets, focus on core business and key projects, and improve asset liquidity and sustainable profitability.

According to the equity information, the top ten shareholders of Oriental Group are Tibet Oriental Runlan Industrial Investment Co., Ltd. (holding 16.64%), Oriental Co., Ltd. (holding 13.47%), Tibet Xiangbin Trading Co., Ltd., Hong Kong Central Settlement Co., Ltd., Liu Yongsi, Dai Guorong, Gao Leijin, Zhou Wenwei, Chen Lijuan, and Harvest CSI Financial Asset Management Plan, and the top ten shareholders hold a total of 35.54% of the shares of Oriental Group.

It is worth noting that on June 22, the company announced that it received the "Notice of Case Filing" issued by the China Securities Regulatory Commission on June 21, 2024, and the China Securities Regulatory Commission decided to file a case against the company due to the company's suspected illegal information disclosure, in accordance with the "Securities Law of the People's Republic of China", "Administrative Punishment Law of the People's Republic of China" and other laws and regulations.

Liquidity is under pressure

Founded in 1989 by Zhang Hongwei in Harbin, Heilongjiang Province, Oriental Group was successfully listed in 1994, and its main business is modern agriculture and health food industry. The main products include rice processing and sales, oil processing and sales, etc., and it is one of the earliest private enterprises in China to implement the shareholding system reform and be approved for listing.

In addition to the agricultural sector, the business of the Oriental Group is also involved in real estate, finance, ports, etc. According to industrial and commercial data, Oriental Group also holds shares in Minsheng Bank and Jinzhou Port respectively, and was also one of the major shareholders of Xinhua Life Insurance, Minzu Securities and Haitong Securities. By investing in other listed companies and financial institutions, Zhang Hongwei's company was also named the "Oriental Department".

As the core subject of the "Oriental Department", the performance of the Oriental Group has continued to lose money in recent years. Financial data show that from 2021 to 2023, the net profit will be 1.719 billion yuan, 996 million yuan, and 1.557 billion yuan respectively, and the cumulative loss amount in three years will be 4.272 billion yuan. The company explained that the main reasons for the loss were that the disposal of assets in the real estate business did not meet expectations, and the company's main business, modern agriculture and health food industry, decreased in business volume during the reporting period.

The performance is in the red, and the company is also facing greater liquidity pressure. According to the data, as of June 17, the balance of deposits of Oriental Group and its subsidiaries in Oriental Finance Company was 1.64 billion yuan, accounting for about 65.55% of Oriental Group's monetary funds (2.502 billion yuan) at the end of the first quarter of 2024, and the balance of loans was 666 million yuan.

As of the end of 2023, the book balance of monetary funds of Oriental Group was 3.179 billion yuan, and the total interest-bearing debt was about 18.6 billion yuan. The balance of short-term borrowings was 8.157 billion yuan, and the balance of non-current liabilities due within one year was 5.257 billion yuan, far exceeding the cash on hand.

According to statistics, as of the end of 2023, the total restricted assets of Oriental Group will reach 26.981 billion yuan, accounting for about 71% of the total assets of the current period and 164% of the net assets of the current period. This includes inventory, long-term equity investments, investment real estate, fixed assets and other current assets, which are mainly used for mortgage loans.

The controlling shareholder of the Oriental Group, Oriental Limited has not had sufficient funds. According to the announcement of Oriental Group on May 27, the company provides joint and several guarantee for the working capital loan of no more than 455 million yuan for the controlling shareholder Oriental Co., Ltd. in Longteng Branch of Harbin Longjiang Bank, with a financing period of no more than 1 year, and the guarantee period is three years from the day after the expiration of the loan term.

At present, the above-mentioned loan has expired on April 20, and the outstanding loan principal balance of Oriental Limited is 454 million yuan. Oriental Co., Ltd. is negotiating solutions such as extension with Longjiang Bank Longteng Branch.

According to the enterprise early warning communication, from 2018 to 2020, the total assets of Oriental Co., Ltd. are above 70 billion yuan. In 2019, the official website showed that the total assets reached nearly 100 billion yuan. According to the public audit report, in 2023, Dongfang Co., Ltd. will have total assets of 68.933 billion yuan, total liabilities of 49.028 billion yuan, and an asset-liability ratio of 71.12%.

Now, under the pressure of multiple funds, facing the imminent reorganization, the stripping of inefficient assets and debt restructuring, Oriental Group said that it would actively cooperate with the reorganization, and said: "Reorganization is different from bankruptcy liquidation, it is a judicial procedure with the goal of saving the debtor's enterprise and restoring the company's sustainable profitability." ”

Oriental Group said that due to the continuous loss of the real estate sector and the failure to meet expectations in the disposal of real estate business assets, the company is currently under great short-term debt repayment pressure, but based on the company's high-quality resources, core business and key promotion projects accumulated over the years, the company's board of directors will actively cooperate with the reorganization application.

Regarding the reorganization, some industry experts said that the reorganization is a judicial procedure with the goal of saving the debtor's enterprise, restoring the company's sustainable profitability, and protecting the legitimate rights and interests of creditors. (Produced by Thinking Finance)■