Author | Anjou Cao

Editor | Liu Baodan

In less than two years of falling into a liquidity crisis, Chen Jinshi, chairman of Zhongnan Construction and former richest man in Nantong, has gone white for the most part.

But I'm afraid Chen Jinshi has no time to recuperate now. Due to recent enthusiastic attention or pressure from government departments, financial institutions, and investors, Chen Jinshi and Chen Yuhan, famous father and daughter in the real estate industry, have ushered in a critical moment of “life and death.” The tough battle of sheltering and survival is already in full swing.

On April 20, Zhongnan Construction confirmed to Wall Street that under the leadership of the Haimen District Government of Nantong City, Zhongnan Construction Investment, the controlling shareholder of Zhongnan Construction, is negotiating cooperation with Taimeng Investment Group (hereinafter referred to as Taimeng), Jiangsu Asset and other institutions, involving debt resolution and equity transactions.

Meanwhile, Taimeng is a famous Asian private equity investment company that has just spent money to save Wanda and lifted its listing from the gambling crisis. It is known as the “Little Black Stone of Asia,” and its asset management scale exceeds 50 billion US dollars.

As a local AMC, Jiangsu Asset is an “old friend” of Zhongnan Construction. It co-set up a fund of 2 billion yuan with Zhongnan City Construction in 2022 to bail out the Central South.

This is bound to be an important negotiation in a race against time, with the high expectations of thousands of investors and creditors.

Two days before Taimeng sat down at the negotiation table, on April 18, Zhongnan Construction warned of the risk of delisting at face value. According to the regulations of the Shenzhen Stock Exchange, if the stock price falls below 1 yuan for 20 consecutive trading days, Zhongnan Construction will be delisted.

As of April 25, Zhongnan Construction's stock price had been below 1 yuan for 14 consecutive trading days, leaving only 6 days left for Zhongnan Construction to keep its cover.

The house leak coincided with overnight rain. Due to negative profits for the last three fiscal years and the most recent year's audit report showing uncertainty about the company's ability to continue operating, Zhongnan Construction's stock was subject to an “Other Risk Warning” on April 24, and the stock abbreviation was changed to “ST Zhongnan”.

In other words, if Zhongnan Construction's stock price does not return to more than 1 yuan/share in a timely manner, and its profitability is not resolved, the company will follow in the footsteps of housing enterprises such as Sunshine City, Taihe, and Blu-ray Development and end up being delisted, which will undoubtedly make matters worse for the current Zhongnan Construction.

At this critical moment, Taimeng appeared, and Zhongnan Construction, which is on the verge of delisting, is also expected to usher in a major turning point.

On April 22, on the first trading day of the negotiation news, Zhongnan Construction swept away the multi-day decline, and the stock price rose 10.53% to 0.84 yuan/share.

Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, said that the negotiations showed that Taimeng has a positive attitude towards the assets and market potential of Zhongnan Construction. Some investors pointed out that Taimeng's entry gave investors in Zhongnan Construction hope. At present, it is unknown whether the debt will be repaid or not, but at least it is good for stock prices.

The 2023 results drastically reversed losses, combined with strong support from the Haimen district government of Nantong City and others. These are all the strength and bargaining chips of Zhongnan at the negotiation table.

With regard to this leading local housing enterprise and tax payment champion in Nantong, the Nantong city and Haimen district governments have recently been very vocal. The Haimen district government has also launched seven major bailout measures for the company. They have stated that they will coordinate negotiations between the company and financial institutions to support social capital in setting up investment funds and introducing strategic investors through market-based mechanisms.

The fact that Zhongnan Construction was able to negotiate with the Pacific League and other agencies this time is one of the results of the Haimen district government's efforts to relieve Zhongnan Construction.

As a “tough guy” who started from scratch and became a ten-billionaire, Chen Jinshi is also trying to save himself.

On the one hand, it launched plans to increase the holdings of directors and executives in an attempt to boost investor confidence; on the other hand, the subsidiary Jiangsu Zhongnan Construction and Transportation Group reached a strategic cooperation with the state-owned Nantong Construction and Transportation Group. Nine other projects have entered the “white list” of the real estate financing coordination mechanism, increasing the credit amount by 670 million yuan. More projects are also being actively applied for.

Of course, until the cooperation between TaiMeng and Zhongnan Construction is finally settled, and the market prospects are clear, the fate of Zhongnan Construction remains uncertain.

If Taimeng is willing to help Zhongnan Construction, the China-South China liquidity crisis can be mitigated or even resolved. In contrast, following the example of Taimeng's commercial management cooperation with Wanda, Zhongnan Construction may need to pay a certain share price and become a company with more diversified equity.

What has received widespread attention from the industry is that through negotiations and cooperation between Zhongnan Construction and Taimeng itself, Taimeng's move to reverse the market and increase real estate intensively is particularly conspicuous.

As a global private equity giant, this negotiation probably represents a positive prediction of the new pattern of the industry after the recent policy boom, the world's smartest capital bosses saw opportunities to help housing enterprises improve their operations and achieve return on investment through this.

Shan Weijian, the executive chairman of Taimeng and the “king of private equity in China,” is optimistic about the long-term development of China's property market. He recently wrote that there is no serious oversupply problem in China's housing market. China's potential demand for real estate is huge, and the housing market can be saved. Immediate complete deregulation should be considered to quickly stabilize the market and restore the role of this pillar industry.

In fact, not only is it about the real estate industry, but Taimeng is also optimistic about the long-term development of the Chinese economy as a whole.

The Chinese headquarters of Taimeng just signed a contract to settle in Suzhou in February. At that time, management revealed that it will fully gather financial strength and continue to introduce high-quality projects to help transform and upgrade the industry.

Shan Weijian also said at the end of last year that the fundamentals of the Chinese economy are stable, and a solid foundation has been laid for China's industrial development.

What can be expected is that with the recent intensive release of favorable real estate financing benefits and frequent sales of luxury homes, the market is emerging at an accelerated pace.

Xing Ziqiang, China's chief economist at Morgan Stanley, predicts that adjustments in the real estate market are expected to gradually come to an end this year and next two years.

In this critical period of bottoming out, this private equity giant, which is good at finding opportunities in the midst of danger and has made huge profits at the bottom of Korea's First Bank and Shenzhen Development Bank, may increasingly appear on housing companies' negotiation tables, setting off an investment feast where more capital never sleeps.

For Chen Jinshi and Zhongnan Construction, getting rid of the immediate crisis of life and death is more important than anything else. This time, Chen Jinshi may have the courage to break the arm of a strong man like Wang Jianlin.