Unexpected Abortion Of 7 Billion M & A Project After The Meeting

A sudden announcement announced that China Merchants Shekou (001979. SZ) had a capital operation abortion of 7 billion yuan.

"Based on the current macro environment change and other reasons, we agree that the company shall terminate the purchase of 24% equity of Shenzhen Nanyou (Group) Co., Ltd. (hereinafter referred to as" Nanyou group ") held by Shenzhen Investment Holding Co., Ltd. (hereinafter referred to as" Shenzhen Investment Control ") by issuing shares and convertible corporate bonds, and sign the transaction termination agreement with Shenzhen Investment Holding Co., Ltd And apply to the CSRC to withdraw the relevant application documents, "China Merchants Shekou said in the announcement on November 16.

It is worth mentioning that the above asset acquisition plan was unconditionally approved by the merger and reorganization committee of the CSRC on September 23.

At the same time, the issuance of another newly approved REITs project with a total amount of 4.15 billion yuan in Shekou of China Merchants also attracted the attention of market participants.

Can't wait for the approval

As early as May 31, this year, China Merchants Shekou announced that it was planning to issue shares, convertible corporate bonds and cash payment to purchase the remaining 24% equity of Nanyou group from Shenzhen investment control, with the overall consideration of the transaction as high as 7.035 billion yuan.

At the same time, it can pay about RMB 77 million to the shareholders of Ping'an oil management Co., Ltd.

However, the above plan failed to come into effect. On September 14, China Merchants Shekou announced that it had stopped the fixed increase fund-raising plan to ping an asset management. The acquisition plan was adjusted to issue additional shares and convertible bonds to Shenzhen investment control, with the consideration paid by issuing shares and convertible bonds being 3.69 billion yuan and 3.34 billion yuan respectively.

After the adjustment, the restructuring of the merger plan will pass. Only on September 23, 10 days after the adjustment plan, the merger and reorganization committee of the CSRC held the 42nd working meeting in 2020, and the issuance of shares by China Merchants Shekou and the purchase of assets by convertible bonds were approved unconditionally.

"In general, this means that the above-mentioned transaction is settled and the company just needs to wait for the approval document." Shenzhen a medium-sized securities firm investment bank pointed out this.

However, a seemingly perfect deal, which lasted nearly six months, failed to wait for approval.

On November 18, the reporter of the 21st century economic report called the investor hotline of China Merchants Shekou on November 18. Its staff only said that it was based on "changes in the macro environment", and the other side said that it was "not aware" of the impact of the tightening of the real estate financial policy.

The recent tightening of investment banking, however, may be related to the failure of real estate regulation. Not long ago, the real estate giant Evergrande group just announced that it had terminated the restructuring plan with Shenzhen real estate (000029. SZ) for four years.

"This kind of large-scale acquisition, the company still hopes to have some financial support. The termination may be related to the cancellation of capital increase by Ping an asset management, and the market has no clear expectation on the issue price," another industry person concerned about real estate financing pointed out to the 21st century economic reporter on November 18.

The issue of REITs like in dispute

Although the "cooked duck suddenly flies", the action of China Merchants Shekou in the capital market continues, and whether other capital operations will also be affected has become the focus of market attention.

More than half a month ago, on October 28, the Shenzhen Stock Exchange announced that the special asset support plan for Shenwan Hongyuan, China Merchants Shekou and tiger Minghua had been approved by the Shenzhen Stock Exchange. The acceptance time of the plan in Shenzhen stock exchange is September 14 this year. At that time, China Merchants Shekou just decided to stop raising funds from Ping an asset management.

It is understood that the bond is ABS with a planned amount of 4.15 billion yuan, and the issuer is China Merchants Shekou Industrial Park Holding Co., Ltd.

The reporter obtained a promotion report named "Shenwan Hongyuan - China Merchants Shekou - Tiger Minghua asset support special plan" (hereinafter referred to as the "report") that China Merchants Shekou plans to finance its two commercial properties through the issuance of special asset support plans (REITs). Among them: priority a 1.8 billion yuan, priority B class 400 million yuan, secondary 1.95 billion yuan (including the company's own 510 million yuan), the legal term of the project is 5 years, but the actual investment period is not more than 38 months.

China Merchants Investment Management (Shenzhen) Co., Ltd. (hereinafter referred to as "CMI") is the fund manager of the project and is responsible for the initiation, establishment and follow-up operation management of the special plan.

Taige apartment and Minghua International Conference Center are located in the west of Nanhai Avenue, Shekou, Nanshan District, and Guishan Road, Shekou, Nanshan District, Shenzhen. Among them, the building area of tiger apartment is 33272.95 square meters, and the house use is residential; the land use right area is 17247.69 square meters, and the land use is residential land.

According to the real estate appraisal report issued by Jones Lang LaSalle (Beijing) land and real estate appraisal consulting Co., Ltd., the appraisal value of the subject property is RMB 4.032.6 billion on the date of May 31, 2020.

According to the financing cost estimation estimated in the report, the comprehensive financing cost priority a of China Merchants Shekou is 3.5%, priority B is 4.5%, and secondary A is 8%, so the corresponding annual interest payment is 196.2 million yuan. The source of repayment is the operating cash flow of the above two properties, and the insufficient interest is made up by China Merchants Shekou.

If calculated by the data provided in the above project report, the actual expenditure of China Merchants Shekou is no less than 510 million yuan and no more than 783 million yuan, corresponding to the 4.15 billion yuan to be raised in this special asset support plan, the leverage ratio of this financing is as high as 81.13% - 87.71%.

It is worth noting that although the ABS product issuance plan has been released by the exchange, the dispute caused by it has just begun.

An institutional investor who had participated in the early stage promotion of the plan told 21st century economic news that it believed that the original financial data issued by China Merchants Shekou was inconsistent with the evaluation data or valuation data compared with the financial statements and audit reports provided by the underlying assets.

The report estimates the net operating income (NOI) of the above two properties in 2020 to be 78.05 million yuan. However, according to the calculation of relevant historical data of tiger apartment and Shenzhen Minghua, the net operating income of tiger apartment and Shenzhen Minghua in 2019 is about 29.2797 million yuan and 30.7286 million yuan, totaling 60.083 million yuan.

This is equivalent to that the operation efficiency of tiger apartment and Shenzhen Minghua will be greatly increased by 30% on the basis of 2019. In the view of the above investors, the completion degree may be more difficult, "let alone affected by the epidemic in the first half of this year".

Even if it is conservatively estimated that this year's operation will not be affected by the epidemic, according to the existing cash flow of the property to pay the interest of investors, China Merchants Shekou may need to pay about 136 million yuan (196.2 million yuan - 60.83 million yuan) annually, rather than 110 million yuan of interest.

This means that the project will also face a total funding gap of no less than 408 million in the duration, which needs to be supplemented by China Merchants Shekou.

Some of the raised funds are used as "reserved funds" to repay shareholders' interest, which also incurs criticism. The above investors believe that this is equivalent to using the investor's principal to repay the investor's interest. If we use this method to calculate the interest coverage ratio provided by China Merchants Shekou to investors, it is actually less than twice, which is far from what the report said: "the coverage ratio of the project company's net operating income and reserved funds to the interest of priority asset-backed securities and the sum of all expenses of special plans and private funds is 2.40 times or more".

In addition, the above-mentioned plan constructs a "share + debt" mode in the underlying structure, and uses it to pay the interest of priority investors in the form of returning shareholders' loans. "This behavior may achieve the purpose of evading the corresponding" corporate income tax ", the aforementioned investors pointed out.

Perhaps because of the above "defects", China Merchants Shekou did not select an appraisal institution from the "summary list of alternative banks of central enterprises' selection and appointment" in strict accordance with the requirements of SASAC on the assets evaluation standards of central enterprises. Its appraisal agency, Jones Lang LaSalle (Beijing) land and real estate appraisal consulting Co., Ltd., was not included in this list, and the commercial property of zhonglvlian was caused by the epidemic Under the general environment of declining valuations, the capitalization rate of 3.14% is still given, which is hard to understand in the eyes of the investors mentioned above.

"We have no way to know about the performance of the two major property assets this year and the predictability. We will further announce the issuance of the asset-backed special plan in the future." China Merchants Shekou investors hotline staff said.

In addition, on November 18, the 21st century economic reporter called Nie liming, deputy general manager of China Merchants Shekou, to inquire about the situation of the above-mentioned asset special plan. He said that "the announcement shall prevail and it is not convenient to accept interviews.".

And the industry insiders concerned about real estate financing also pointed out that "whether the above asset special plan can be successfully issued depends on the situation of underlying assets. If there is a big gap between the real performance and the evaluation, it may not be able to raise so much money."