The business sea is ups and downs, and the big waves wash away the sand.
In recent years, some companies that have stepped on the wrong pace have continued to lose money and become insolvent, and they have gone bankrupt and reorganized. Many of them are listed companies.
Bankruptcy and reorganization of listed companies has become an important way to resolve risks and improve the quality of listed companies.
The market pays extensive attention to how to reorganize such listed companies in a market-oriented and rule-of-law manner. Shali Lijin has significantly resolved the debt risks of related listed companies, the interests of all parties have been better coordinated, and the overall healthy and stable development of the capital market.
Recently, Qinghai Salt Lake Co., Ltd. has completed judicial reorganization and returned to A shares, which can be regarded as a benchmark project to prevent and defuse major risks and support poverty alleviation and development in the western region. The enlightenment of its rebirth is of typical reference significance.
From "Qinghai Moutai" to "Loss King"
Salt Lake Co., Ltd., located in Golmud City, Qinghai, owns the mining right of one of the world's largest salt lakes in the Chaerhan Salt Lake salt mine.
Holding this "cornucopia", Salt Lake Co., Ltd. has become the production base of China's potash fertilizer industry, undertaking 70% of China's potash fertilizer supply.
It is also a financial pillar enterprise in Qinghai Province and a leading enterprise in the national Qaidam Circular Economy Experimental Zone. The actual controller is the Qinghai Provincial State-owned Assets Supervision and Administration Commission.
After the listing of Salt Lake in 1997, the net profit attributable to the parent company has gradually grown from less than 50 million yuan to more than 1 billion yuan.
In 2008, the company's market value exceeded 100 billion yuan and was once called "Qinghai Moutai" by shareholders.
However, such a company with "high barriers" made its first annual loss in 2017.
In 2018, due to the negative value of net profit for two consecutive fiscal years, the Shenzhen Stock Exchange implemented a delisting risk warning, and the stock abbreviation was adjusted to "*ST Salt Lake".
In 2019, with a loss of 45.86 billion yuan, it became the "loss king" of A shares that year.
On August 16, 2019, *ST Salt Lake issued an announcement stating that the company was unable to pay off its due debts and was obviously lacking in solvency. The creditors applied to the Xining Intermediate People's Court to reorganize the company.
The main reason for "Going Mai City" is that a set of integrated magnesium metal projects was launched for the comprehensive utilization of salt lake resources. Due to insufficient estimates of the project funding and construction difficulty, the company failed to reach production and profitability according to the design and plan, which dragged the company into Quagmire.
And since 2018, the uncertainty of the domestic and international environment has increased.
The blindly expanding Salt Lake shares fell into a vicious circle of “more water and more water, and more water”. The investment in Salt Lake Magnesium Industry and Heina Chemical Industry was greatly increased, and eventually became insolvent.
On May 22, 2020, the listing of Salt Lake shares was suspended, and its debt scale was huge. The creditor's rights involved many financial institutions in Qinghai Province, and major regional financial risks were imminent.
Strip assets and go lightly
Salt Lake shares debts of nearly 50 billion yuan, even the bank's interest payment is a problem.
But if the company goes bankrupt and liquidated, it will be a fatal blow to China's potash fertilizer industry.
Therefore, Salt Lake shares must and can only "rebirth from the ashes."
Upon hearing the news of the judicial reorganization of Salt Lake, the relevant person in charge of China International Capital Corporation contacted Qinghai Province as soon as possible, expressing his willingness to take over this project and do his utmost to help the salt lake “nirvana rebirth”.
Under the guidance of the National Development and Reform Commission, the China Banking Regulatory Commission, the China Securities Regulatory Commission and other ministries and commissions, Qinghai Province has jointly put forward a solution: get rid of relying on financial assistance from state-owned shareholders, save distressed enterprises by "blocking holes", and divest them in a market-oriented way. Loss of assets, adjustment of assets and business structure, a comprehensive implementation of debt restructuring with deleveraging as the goal, and ultimately get rid of operating and debt difficulties.
On August 10, 2021, the reorganized Salt Lake shares returned to A shares, and the total market value once exceeded 200 billion yuan.
The market praised the rebirth of Salt Lake Shares with real money.
How does Salt Lake's shares change?
Asset reorganization is like playing poker, first sorting out the cards in your hand, and then recombining them with new logic to rediscover value.
Sorting out the main business of Salt Lake Co., Ltd., if the magnesium plate is removed, it should be in a profitable state.
Therefore, under the leadership of the Qinghai Provincial Government, the first step is to divest assets and focus on the main business.
Before the reorganization, the fixed assets and construction in progress of Salt Lake Co., Ltd. contained a large number of inefficient and ineffective assets, resulting in large depreciation and impairment losses.
Through judicial reorganization, Salt Lake Co., Ltd. divested Salt Lake Magnesium, Haina Chemicals and Chemical Branches from the listed company, successfully blocked the "bleeding point", and obtained corresponding cash consideration to deal with the funds required for normal operations and part of the debt ’S spot cash reimbursement.
As a result, Salt Lake shares got rid of the burden and moved lightly.
Before the reorganization, the total liabilities exceeded 50 billion yuan.
After the reorganization, the total debt scale was reduced to 14.8 billion yuan, the debt-to-asset ratio fell to about 70%, depreciation was greatly reduced, and indicators such as return on total assets and turnover rate were significantly improved, and it is expected to further drop to A more robust level.
As a result, the cost is greatly reduced and the potential is released.
Before the reorganization, the three-year average financial expenses were about 1.6 billion yuan, which swallowed a lot of operating profits.
After the reorganization, the financial expenses for the first year were only 390 million yuan.
Salt Lake has divested its blood-loss assets, and the remaining businesses are the potash fertilizer sector and lithium carbonate sector with better efficiency, and the capital structure is optimized.
The net profit for the whole year of 2021 is expected to exceed 4 billion yuan.
What brings more room for imagination to the market is that taking advantage of the "east wind" of the great development of new energy vehicles, the extraction of lithium from salt lake has become a hot technology path, and salt lake shares have certain advantages here.
Although the current profits related to lithium products account for less than 10% of its total profits, the potential is huge.
Salt Lake's continuous investment in the lithium industry will provide an important basic guarantee for the development of China's new energy automobile industry, and will also provide strong support for China to achieve the goal of carbon neutrality and carbon peaking.
At the same time, the judicial reorganization of Salt Lake Co., Ltd. finally realized the optimal repayment of various types of claims and achieved a win-win result that is rare in the market. It also significantly improved the financial environment of Qinghai Province and boosted market confidence.
The "hand of the market" is organically combined with the role of the government
The salt lake resource is the largest resource in Qinghai, and it is also a national strategic resource. It is of great strategic significance to do a good job in development and utilization and accelerate the construction of a world-class salt lake industrial base.
At present, driven by favorable factors such as industrial policies and market space, the price of lithium salt is rising steadily, and lithium mines have become "a battleground for military strategists."
On October 9th, Canadian lithium salt dealer Neo Lithium disclosed that Zijin Mining purchased all the issued shares of the company for approximately RMB 4.96 billion.
The Neo Lithium3Q lithium salt lake project is one of the largest and highest-grade projects of its kind in the world.
The Chaerhan Salt Lake is not inferior. It is the largest soluble potassium and magnesium salt deposit in China, with reserves of potassium chloride, magnesium chloride, lithium chloride, and sodium chloride ranking first in the country.
Is there any reason for the salt lake shares that have mines in their hands?
Under the coordination of the central government, Salt Lake Co., Ltd. is working hard to build a world-class salt lake industrial base.
During the interview, the reporter deeply felt the rebirth of Salt Lake, and two enlightenments were thought-provoking.
Revelation 1: The capital market has played an irreplaceable role in resolving the risks brought about by the economic cycle.
The discovery and pricing of asset value by the capital market is both direct and effective.
Before the salt lake reorganization, good and bad assets were mixed together, and the capital market gave a market value of less than 20 billion yuan, completely ignoring the strategic role of potash and the scarcity of investment.
After the reorganization, the bad assets were divested, and the market value is currently stable at more than 150 billion yuan.
Through the process of rediscovering the value of assets, creditors effectively mitigated the debt risk.
At the same time, the capital market is enthusiastic, and a large amount of social capital investment will boost the rapid development of China's salt lake industry.
Of course, not every reorganization case can achieve the desired outcome.
In fact, since China has implemented active and steady reduction of capacity and deleveraging, it has established a set of systems centered on the principles of marketization and rule of law to ensure that zombie companies and companies that should withdraw cannot continue their lives through debt-to-equity swaps.
In other words, it is up to the market to judge who is the promising company and who should be liquidated. If the wrong selection is made, the debt-to-equity swap implementing agency and investors must bear the losses, and the government will not cover the bottom line.
From the perspective of the capital market, it is necessary to resolutely clear out major violations of laws and regulations or incurable zombie companies, so as to give limited market resources to better and more profitable companies.
So, from the perspective of investment banks, how to judge whether a company is going to live or die?
A person from CICC stated that the core has three dimensions.
The first dimension is how are the fundamentals of the company?
If the fundamentals are not good at this stage, but there can be a process of value rediscovery, there will be a "life".
This needs to be combined with the development direction of the industry to identify whether debt companies have salvage value and the possibility of regeneration.
The second dimension is how much impact will the reorganization have on creditors, especially creditors of financial institutions?
Through hard work, it is actually one of the core values of investment banks to minimize this impact and reduce the losses of creditors.
The third dimension is social effect.
In the salt lake reorganization, CICC used its rich capital operation experience and deep industry research knowledge to analyze the company’s advantages, tap the value of corporate investment, and successfully implement debt swaps under the circumstances of high corporate debt risks and lack of confidence in shareholders and creditors. share.
At the same time, the efficient implementation of the whole process and continuous tracking services help companies grasp the window period for the continuous improvement of the industry cycle, sort out investment stories, successfully realize the resumption of listing and increase the market value, create value for all parties, and effectively achieve a win-win situation for all parties.
Revelation 2: Under the principle of marketization, the role of the government is also indispensable.
The key step for the success of the reorganization of Salt Lake is that the former relevant leader of the Qinghai Provincial People's Government is appointed to Qinghai Salt Lake Industry Co., Ltd.
This move strengthened the confidence of all parties in the future of Salt Lake, thus effectively promoting the success of the reorganization.
The role of the government is an indispensable stabilizer in safeguarding industries, safeguarding jobs, and safeguarding stability.
Judicial reorganization is an important means to save the companies that are on the brink of destruction. This process should mainly use market mechanisms and economic means, and respect the rational choices of market entities.
When the government participates in the reorganization of listed companies, it can neither ignore the interests of many creditors in the name of protecting state-owned assets, nor can it do nothing and just let it go.
On the whole, the government must not be offside or absent.
Doing a good job in the bankruptcy and reorganization of listed companies will help prevent and defuse financial risks, help capital flow to the places where the real economy is most needed, and protect the high-quality development of the real economy.
Our reporter Zhu Huichun