The crisis of Yuneng Chemical Group behind the Yongmei bond default: a “race” between reform and debt default

Although defaulted bonds can be rolled over, this only buys time to avoid cross-defaults and credit collapse. Yuneng Chemical Group still needs to engage in a self-rescue "race" between broken-arm reform and debt default.

If Yongcheng Coal and Electricity Holding Group Co., Ltd. (hereinafter referred to as Yongmei Holdings) is compared to a butterfly, then the impact of the default of the corporate bonds on November 10 will have an impact on Henan, 300 kilometers away. For Energy and Chemical Industry Group Co., Ltd. (hereinafter referred to as Yuneng Chemical Group), it may be a storm.

Judging from the relationship between the two, Yuneng Chemical Group holds 96.01 shares of Yongmei Holdings, which is also the core enterprise of Yuneng Chemical Group. Today, Yongmei Holdings' bond default has directly affected Yuneng Chemical Group. The latter's credit rating has been downgraded from AAA to BB, and its duration bonds have fallen into cross-default risk.

As the largest state-owned enterprise in Henan Province, can Yuneng Chemical Group just watch Yongmei Holdings default and "do nothing to save it"? In fact, after repaying 1 billion yuan of debt for Yongmei Holdings in August, Yuneng Chemical Group, which is overwhelmed by short-term debt of more than 50 billion yuan, may no longer have the conditions to continue to donate generously.

Yongmei's "request for help failed": Yuneng Hua's short-term debt of over 50 billion was overwhelmed

More than 10 days after the actual default, under the convening of the lead underwriters Everbright Bank and Zhongyuan Bank, " The 20Yongmei SCP003” holders meeting was held overnight on November 23. As the issuer, Yongmei Holdings did not wait for assistance from Yuneng Chemical Group again.

In fact, at the first 2020 holders meeting of "20 Yongmei SCP003" on the evening of the 23rd, the content discussed and approved was mainly "about agreeing to the issuer to pay 50 principal in advance. , the remaining principal will be extended for 270 days, the interest rate will remain unchanged during the extension period, the principal and interest will be paid in one lump sum upon maturity, and the proposal to exempt the default of this bond will be waived." It did not mention anything related to Yuneng Chemical Group.

"Of course we hope that the (Yuneng Chemical) Group can take certain actions." The above-mentioned Yongmei Holdings person said frankly. In fact, just 3 months ago, Yuneng Chemical Group provided Yongmei Holdings with funds to repay the "2020 First Phase of Ultra-Short-term Financing Bonds" (hereinafter referred to as 20 Yongmei SCP001) through bond issuance. .

Before "20 Yongmei SCP001" is about to expire, the "Henan Energy and Chemical Industry Group Co., Ltd. 2020 Second Phase Medium-Term Notes Prospectus" announced by Yuneng Chemical Group on August 14 shows that this The issuance of medium-term notes intends to raise 1 billion yuan, and all the funds raised are intended to be used to repay the debt financing instruments of the subsidiary. The debt financing instrument of the subsidiary that needs to be repaid is Yongmei Holdings "20 Yongmei SCP001".

Yongmei Group did not explain why Yuneng Chemical Group issued bonds as compensation. However, for Yuneng Chemical Group, which is a large state-owned energy and chemical group and even the largest state-owned enterprise in Henan Province, Yongmei Holdings does play an extremely important role.

Yongmei Holdings mentioned in the bond issuance materials that the company, as the most important component of Yuneng Chemical Group, has always been the largest subsidiary of Yuneng Chemical Group. As of the end of June 2020, Yongmei Holdings The total assets of Coal Holdings account for more than 50% of the total assets of Yuneng Chemical Group.

Before "20 Yongmei SCP003" expired on November 10, due to tight liquidity, Yongmei Holdings was unable to raise sufficient funds for redemption as scheduled. Yuneng Chemical Group, which did not continue to provide assistance to its core subsidiaries, was also affected by the default of Yongmei Holdings - its credit rating was downgraded from AAA to BB, and its duration bonds were also exposed to the risk of cross-default.

“I don’t know their financial situation, but their due debts are also relatively concentrated.” The above-mentioned Yongmei Holdings source revealed. In fact, Yuneng Chemical Group, which is as debt-heavy as Yongmei Holdings, may just be unable to do so.

Yuneng Chemical Group’s financial statements for the third quarter of 2020 show that as of the end of the third quarter, the company had 28.563 billion yuan in monetary funds, while current liabilities were 162.595 billion yuan, mainly short-term borrowings and payables Notes and accounts payable, including short-term borrowings, amounted to 54.078 billion yuan.

According to statistics from CICC, the amount of existing bonds of Yongmei Holdings and Yuneng Hua is close to 50 billion yuan, and all publicly offered bonds of the parent and subsidiary companies totaling 26.5 billion yuan have cross-protection clauses. Among them, Yongmei has 15 bonds worth 15 billion yuan, and Yuneng Chemical has 10 bonds worth 11.5 billion yuan.

"If cross-defaults are confirmed, it may further increase the pressure on enterprises to pay in the short term." CICC said.

At the same time, as the controlling shareholder of Yongmei Holdings, Yuneng Chemical Group also borrowed a large amount of funds from Yongmei Holdings. The "Yongcheng Coal and Electricity Holding Group Co., Ltd. 2020 Sixth Medium-Term Notes Prospectus" disclosed on the Shanghai Clearing House website on October 16 shows that as of the end of June 2020, Yongcheng Coal and Electricity Holding's other receivables (excluding dividends receivable) and interest receivable) was 15.598 billion yuan, mainly the current accounts with Yuneng Chemical Group and its affiliated units, and the scale of fund lending was large.

The fat "Fortune 500": profits mainly come from investment income

From the current point of view, when it comes to the problem of mine explosions in core subsidiaries, Yuneng Hua failed to "rescue" it in time. The group may also have its own concerns.

Ning Kai (pseudonym), who is in Yili, doesn’t know much about the Henan headquarters. However, as a department head of Yongning Coal Chemical, a secondary subsidiary of Yuneng Chemical Group, I have heard about the financial difficulties at the group level.

This difficulty even affects the payment of employees’ wages. "The capital situation was a little tight in the past period, but it gradually became normal after July and August." In mid-November, Ning Kai said, "In May and June this year, a batch of loans of the group company expired, which caused a strain on the company's capital chain and affected (the) Payment of wages in May and June.”

At present, although it has passed the loan repayment barrier in the middle of the year, as the largest provincial coal enterprise group in Henan Province, the debt pressure of Yuneng Chemical Group has not improved significantly. Information disclosed by the Shanghai Clearing House shows that as of the end of the third quarter of this year, Yuneng Chemical Group’s total assets were 264.221 billion yuan, total liabilities were 215.476 billion yuan, net assets were 48.746 billion yuan, and the asset-liability ratio reached 81.55.

From the perspective of financial status, Yuneng Chemical Group’s high debt ratio has become the norm in recent years. The company's 2020 third-phase medium-term note prospectus shows that Yuneng Chemical Group's asset-liability ratios in the past three years (2017~2019) are 82.71, 79.98, and 79.97 respectively.

As for the reasons for the high debt ratio, Yuneng Chemical Group mentioned: In recent years, due to the issuer (namely Yuneng Chemical Group) promoting industrial structure adjustment and upgrading, increasing resource integration, and being subject to objective The influence and restriction of factors have caused the issuer's borrowing scale to show an upward trend, which to a certain extent has increased the issuer's overall asset-liability ratio.

Today, for Yuneng Chemical Group, high debt ratio has become a risk factor that must be mentioned when issuing bonds. It mentioned in its latest bond issuance: In the future, with the capital expenditures brought about by the issuer's business development, the issuer's financial pressure will further expand. If the issuer's asset-liability ratio cannot be maintained within a reasonable range, the issuer will People will face certain financial risks.

It is worth noting that information on the official website of Yuneng Chemical Group shows that as of December 2019, Yuneng Chemical Group had 179,000 employees, more than 80 million tons of coal production capacity, and a total chemical product production capacity of 1,000 tons. million tons, and owns many domestic and overseas listed companies such as Dayou Energy. The group ranks 484th among the world's top 500 companies in 2019, 119th among the top 500 Chinese companies, 7th among the top 500 Chinese petroleum and chemical companies, and 11th among the top 50 Chinese coal companies.

However, this company with a glamorous appearance does not rely on a large-scale industry to make its profits.

Bond issuance documents show that in recent years, due to the decline in profitability of the coal chemical industry sector, Yuneng Chemical Group's operating business profit losses have increased significantly, and its profits mainly come from investment income.

Financial data shows that from 2017 to 2019 and the first three quarters of this year, the net profit attributable to the parent company of Yuneng Chemical Group was -464 million yuan, -882 million yuan, -2.113 billion and -1.964 billion yuan respectively. , losses are almost increasing year by year.

Yunenghua mentioned when issuing bonds: The coal business is the most important component of the issuer’s business sector. Unfavorable factors such as macroeconomic downturns and industry cycle fluctuations in the future may affect the issuer’s business. Profitability, the issuer faces the risk of continued negative net profit attributable to the parent company.

Judging from the current situation, while profits have not improved, the company's short-term solvency indicators have continued to deteriorate.

The financial statements for the third quarter of 2020 show that as of the end of the third quarter, Yuneng Chemical Group’s current liabilities were 162.595 billion yuan, accounting for 75.46% of the total liabilities. In the opinion of an accounting person, this debt structure is unreasonable. The higher the current liabilities, the more liabilities the company needs to repay in the short term, and the greater the company's operating risks and financial pressure.

Due to high current liabilities, Yuneng Chemical Group's current assets have been unable to cover current liabilities. Its latest current ratio and quick ratio are 64.04 and 56.39 respectively, and its short-term debt solvency indicators continue to deteriorate.

In addition, as of the end of the third quarter of 2020, Yuneng Chemical Group still had non-current liabilities of 52.88 billion yuan, mainly bonds payable and long-term loans. Its long-term interest-bearing liabilities totaled more than 40 billion yuan. The high interest-bearing liabilities also make Yuneng Chemical Group's annual financial expenses astonishing. In 2018, 2019 and the first three quarters of 2020, its financial expenses were 8.765 billion yuan, 7.982 billion yuan and 5.123 billion yuan respectively, which had a negative impact on the company's profits. Severe erosion occurs.

In addition, in terms of debt repayment funds, Yuneng Chemical Group mainly relies on external financing, and its financing channels are relatively diversified. In addition to bond issuance and borrowing, it also uses lease financing, accounts receivable financing, and equity financing. , equity pledge and trust financing.

However, according to an unnamed certified public accountant, despite diversified financing channels, Yuneng Chemical Group’s net financing cash flow has been a net outflow all year round, indicating that its external financing environment has deteriorated. . Affected by the bond default of Yongmei Holdings, its bond rating has been downgraded to BB by the rating company, which is even worse.

The "blood loss point" of the coal chemical industry: 70 billion assets continue to lose money

As the year is approaching, according to insiders of Yongmei Holdings, even though wages have been in arrears for several months, their top priority is It has been placed on "all-out bond protection". In fact, when Yongmei Holdings is deeply mired in debt, its parent company Yuneng Chemical Group, which is deeply financially tied to it, has obviously already realized its own problems.

"If an enterprise does not eliminate losses, losses will eliminate the enterprise. This is the basic principle of the market economy." As early as March 24 this year, Yuneng Chemical Group held a mobilization video meeting to control the sources of losses in the chemical sector. Liu Yinzhi, Secretary of the Party Committee and Chairman of Nenghua Group, pointed out in his speech that if the company still cannot turn around losses within three years, it will not hesitate to close the exit and put it up for sale, so as to completely stop the "bleeding point" from the root.

Information on the company’s official website shows that Yuneng Chemical Group was approved by the Henan Provincial Party Committee and the Provincial Government and established after two strategic reorganizations in December 2008 and September 2013 respectively. The chemical industry group mainly involves industries such as energy, high-end chemicals, modern logistics, financial services, intelligent manufacturing and new alloy materials.

Based on the relevant bond issuance information disclosed by Yuneng Chemical Group, the "bleeding points" mentioned by Liu Yinzhi include the chemical sector. At the beginning of this month, "Henan Business Daily" quoted a member of the reform team of Henan Energy (ie Yuneng Chemical Group) as saying, "Henan Energy (ie Yuneng Chemical Group) has more than 70 billion assets in the coal chemical sector and has been losing money.

”

However, for a long time, the huge annual losses incurred by the chemical industry have seriously dragged down Yunenghua’s performance. In a bond issuance document in August, Yunenghua Group mentioned that the coal industry The company is highly cyclical, and the profitability of the company's coal sector is still uncertain and volatile. At the same time, another important sector of the company, the chemical sector, continues to suffer losses. In 2019, the gross profit of the chemical sector was -718 million yuan. In the first quarter of 2020, the chemical sector The gross profit is -265 million yuan, and there is a risk that the operating profit and net profit of the latest period will decline significantly year-on-year.

At the same time, Yuneng Chemical Group has experienced one period in the past three years (2017~2019 and 2020). The net profits in the first quarter of the year were 50.3464 million yuan, 81.9075 million yuan, 38.7870 million yuan and 1.0561 million yuan respectively.

It is not difficult to see by simply comparing the two sets of data that the chemical industry sector has obviously decided to change Yuneng. The key factor for the overall profitability of the group.

Financial data disclosed in the bond issuance documents show that in the past three years and the first quarter of 2020, the chemical industry of Yuneng Chemical Group achieved revenue of 24.816 billion yuan and 38.054 billion yuan respectively. , 26.769 billion yuan and 4.663 billion yuan, with gross profit margins of 6.46, 8.96, -2.68 and -5.68 respectively. The gross profit margin level is low and the profitability is weak.

For the coal chemical business, Yuneng Chemical Group. It also has many concerns. It mentioned in a prospectus in August: The upstream of the coal chemical business is the coal production industry, and the downstream is the steel, chemical and other industries. Upstream coal is a resource product, and its price is on the rise due to the impact of supply-side reform. , costs have increased, downstream is affected by macro-control and market competition, and sales prices are under great pressure. The company's coal chemical business is at risk of weak profitability.

After the government's capital injection of 15 billion: Yuneng Chemical Group. Can you survive with a broken arm?

"After all, it is such a large company, with nearly 200,000 people in the entire group, so the financial constraints should only be temporary. "Although it is far away in Xinjiang, in Ning Kai's view, similar to the concentrated debt maturities in May and June, the difficulties in Yuneng's transformation are only temporary.

However, a simple headache can be solved by treating the head and feet. Judging from the current information, Yuneng Chemical Group is indeed planning an overall reform.

Information from authoritative channels shows that at the end of September this year, Henan. The debt resolution team led by Provincial Vice Governor Wang Xinwei has been stationed in Yuneng Chemical Group.

Judging from information from all parties, the reform of Yuneng Chemical Group is focused on divestment of chemical assets. Data show that as the largest industrial enterprise in Henan Province, the chemical sector of Yuneng Chemical Group has 35 major chemical enterprises, 94 sets of chemical equipment, 18 types of products, and a production capacity of nearly 10 million tons, accounting for three-quarters of the chemical industry in Henan Province. . In 2019, Yuneng Chemical Group ranked 7th among the top 500 Chinese petroleum and chemical companies and 2nd among non-state-owned enterprises.

"Henan Business Daily" reported that Yuneng Chemical Group has launched the chemical industry sector. , the original intention is to achieve diversified business value, but because the main products are basic chemical raw materials such as methanol, Chemical Industry 40 is closely related to real estate and is greatly affected by the real estate market. Secondly, when Yuneng Chemical Group entered the market, basic chemical raw materials were eliminated. There is already an oversupply, and there will be more companies in the future.

Yuneng Chemical Group established Henan Energy Chemical Group Chemical New Materials Co., Ltd. (hereinafter referred to as Chemical New Materials Company) in 2017. Yuneng Chemical Group All its chemical companies are packaged into this company. Qixinbao shows that the company controls 14 chemical companies and has actual control over 53 companies.

Yuneng Chemical Group was in Shanghai on November 2. The announcement issued by the clearing house shows that the specific divestiture of the chemical sector is as follows: the equity of the new chemical materials company will be divided into 4 25 shares, which will be divested to Hebi Municipal Government, Yongcheng City Government, Puyang Municipal Government and Henan Equipment Investment Group. p>

Almost at the same time, as the core subsidiary of Yuneng Chemical Group, the chemical assets of Yongmei Holdings were also transferred to the Chemical New Materials Company.

On November 2, Yongmei Holdings issued an announcement on the free transfer of assets. Judging from the announcement, in addition to divesting all the shares it already held in Zhongyuan Bank, Yongmei Holdings mainly divested its coal chemical company with large losses to a new chemical materials company under Yuneng Chemical Group.

From the perspective of equity relationships, except for Zhongyuan Bank, the other coal chemical companies set aside are all first-level subsidiaries of Yongmei Holdings; judging from the operating conditions of the set targets, Longyu Coal Chemical Industry and Yongyin Chemical Industry are both insolvent enterprises with negative net profits, which has caused great erosion to the profitability of Yongmei Holdings.

According to the audit report of Yuneng Chemical Group on December 31, 2019, the total assets involved in the free transfer of statements were 66.130 billion yuan, accounting for 24.12% of the total assets of the group's 2019 consolidated statements; free of charge The transferred assets achieved a net profit of -3.743 billion yuan in 2019, accounting for -9598.27 of the group's 2019 consolidated income statement net profit.

According to many people in the bond and capital markets, the recent asset divestitures of Yuneng Chemical Group and Yongmei Holdings, government capital increases, and changes in personnel management all indicate that the company has begun the process of self-rescue. Road, and Henan Province's support has been implemented one after another, but the top priority now is to make every effort to prevent further defaults on the bonds, and then restore its own "hematopoietic" function.

However, the recovery of "hematopoietic" ability is not easy. When divesting chemical assets, the coal business that Yuneng Chemical Group relies on is not currently in a boom cycle. China Chengxin said in its rating report that since the outbreak of the new coronavirus in 2020, the operating rate of major downstream coal industries has been insufficient, and the overall coal market price has shown a downward trend, which will have a certain adverse impact on the profitability of coal companies.

At the same time, the bond default incident of Yongmei Holdings continues to ferment. Yongmei Holdings disclosed on the evening of the 24th that the defaulted bond "20 Yongmei SCP003" has been extended. However, on the previous day (November 23), both "20 Yongmei SCP004" and "20 Yongmei SCP007" failed to be paid in full on time, triggering the cross-protection clause of the surviving bonds again.