China Communications Real Estate, which has four presidents changed in five years, is farther and farther away from its dream of “the top three central enterprises”. More precisely, it has stood at the end of the central enterprises’ developers.

When the sales of developers such as China Merchants Shekou, China Shipping, Poly, and China Resources, which are also central enterprises, have reached hundreds of billions in sales, CCCC Real Estate’s 100 billion progress bar has just passed halfway.

In 2020, under the leadership of then President Li Yongqian, CCCC Real Estate achieved contracted sales of 53.3 billion yuan, fulfilling its sales target for that year. Due to the desire for scale, CCCC Real Estate will be quite aggressive in 2020. The company added 30 new land in the whole year, twice the amount in 2019, and its floor space has increased by 176.90% year-on-year to 6,355,900 square meters.

After a brief victory, the plight of CCCC Real Estate became more and more obvious. Even if the scale exceeds 50 billion yuan, the company’s profitability continues to fall, and the debt indicator has stepped on two red lines in a row. How to balance the scale and debt has become a difficult problem for CCCC Real Estate.

Three delays in accounts payable

After the transfer of assets to return funds, borrowing from the parent company’s real estate group, and the transfer of surplus funds from affiliated companies, CCCC Real Estate has launched a new round of financing measures.

On June 14, CCCC Real Estate disclosed that the company plans to carry out non-standard supply chain financial asset securitization business with Ping An Wealth Management and Centennial Asset Management, with a total financing of no more than 3 billion yuan, mainly for payment of the project company’s accounts payable .

CCCC Real Estate said that this non-standard supply chain financial asset securitization business can extend the payment period of the company’s accounts payable, effectively alleviate the company’s short-term cash flow pressure, and optimize the liability structure.

This is not the first time that CCCC Real Estate has adopted this method to extend the payment time of accounts payable.

On January 14, CCCC Real Estate announced that in order to speed up capital turnover and increase capital utilization, the company and its subsidiaries intend to cooperate with the Bank of East Asia in refactoring business. The latter will provide CCCC Real Estate with a total of 400 million yuan. The re-factoring limit, the subject of the transaction is the accounts payable of the subsidiary of CCCC Real Estate, that is, the accounts receivable of the corresponding supplier.

The specific business content is that the supplier transfers the accounts receivable to the factor. The Bank of East Asia agrees to accept the transfer of the accounts receivable from the factor after confirming that the accounts receivable meets the agreed conditions, and the Bank of East Asia will guarantee the transfer of the accounts receivable. The manager provides non-recourse re-factoring services, and CCCC Real Estate acts as the co-payer of its subsidiaries.

Guan Rongxue, an analyst at the Zhuge Housing Data Research Center, told reporters that the cooperation between real estate companies and insurance companies to carry out non-standard supply chain financial asset securitization business is one of the ways that companies often use to ease short-term cash flow pressure. But the same operation three times in a row in six months can’t help but make people question, is the short-term cash flow of CCCC Real Estate already so tight?

According to data, as of the end of 2020, the amount of CCCC Real Estate’s accounts payable was 8.961 billion yuan, an increase of 48.45% from the 6.036 billion yuan in 2019, all of which must be paid within one year.

The “International Finance News” reporter noted that the substantial increase in the accounts payable of CCCC Real Estate that year was mainly due to the increase in land payables. In 2020, CCCC Real Estate added 2.577 billion yuan in land payables, and the company did not have such expenditures in 2019.

In the same year, CCCC Real Estate’s short-term loans amounted to 2.239 billion yuan, and non-current liabilities due within one year were about 5.819 billion yuan. If the accounts payable of 8.961 billion yuan are included, the company’s short-term debt level reaches 17.019 billion yuan, and the corresponding monetary capital in the same period is only 11.534 billion yuan, which is obviously out of balance.

From this point of view, it is understandable that CCCC Real Estate has extended the payment time of accounts payable many times.

Dilemma

But it is obviously not enough to relieve financial pressure in this way.

On June 14, CCCC Real Estate also disclosed an announcement on providing counter-guarantees to related parties for the issuance of corporate bonds. According to the announcement, CCCC Real Estate intends to publicly issue corporate bonds of no more than 1.2 billion yuan. The controlling shareholder of the real estate group will provide joint liability guarantee guarantee, and CCCC Real Estate will provide counter-guarantee for it.

After several rounds of financing, it is not clear how much breathing space China Communications Land has to compete for. However, from the current situation, reducing debt is quite important for the company.

According to data from the Shell Research Institute, in 2020, CCCC Real Estate’s debt-to-asset ratio after excluding advance receipts is 83.4%, exceeding the 70% red line; the net debt ratio is 296.4%, an increase of approximately 146.2 percentage points year-on-year; the cash short-term debt ratio is 1.43 , Step on two lines.

According to the “three red lines” financing rules, real estate companies that stepped on the two “red lines” will be classified as “orange files”, and the annual growth rate of the scale of corporate interest-bearing liabilities shall not exceed 5%. Therefore, if the debt level is not optimized, the already weak CCCC Real Estate will be restricted in financing, and it will be more difficult for the company to move closer in scale.

Guan Rongxue told reporters that the current dilemma of CCCC Real Estate is that, on the one hand, the company is inefficient in the process of resource integration, and on the other hand, it is because the company pursues large-scale acquisition of mergers and acquisitions projects and large-scale expansion of land reserves.

According to Guan Rongxue, although the development of non-standard business has extended the debt period, CCCC Real Estate’s long-term cash flow pressure still exists.

As of the first quarter of 2021, CCCC Real Estate’s short-term borrowings have fallen to 890 million yuan, but the bills payable in the same period has increased by 57.523% compared with 2020 to 37.054 million yuan, and long-term borrowings have increased by 43.5% compared with 2020 to 35.678 billion yuan. Bonds have also increased from 5.011 billion yuan in 2020 to 8.144 billion yuan.

In addition, due to the increase in short-term loans payable to shareholders, other payables of CCCC Real Estate also increased by 217.93% from 2020 to 6.93 billion yuan. With the continuous support of the parent company, the amount of this part of the funds may remain high in the short term.

Under the high pressure of debt, CCCC Real Estate continues to provide guarantees for its holding subsidiaries and shareholding companies. As of May 31, the balance of guarantees between its holding subsidiaries and holding subsidiaries was 12.357 billion yuan, accounting for 403.64% of the net assets attributable to the parent at the end of 2020; the balance of guarantees for participating companies that were not in the scope of the consolidated statement was 2.107 billion yuan , Accounting for 68.82% of the parent’s net assets at the end of 2020.