Author | Anjou Cao

Editor | Zhou Zhiyu

Over the past four years, Chairman Chen Zhuolin of the board of directors of Agile, one of the “South China Five Tigers,” has been trying to ensure public debt repayment. As a result, he and Agile are also known as “tough guys in the Greater Bay Area” and have been recognized by investors. Today, Chen Zhuolin has to make a difficult choice to deal with a more complex and changing market cycle.

On May 14, Agile announced that it had failed to pay interest relating to a bill totaling US$483 million during the grace period.

As a representative of “debt repayment model,” Agile is now making this choice, and the industry is not surprised; it has even received a lot of understanding and sympathy. Some investors are impressed. Under the circumstances of the past few years, it is respectable to be able to insist on debt repayment. Currently, the focus of housing enterprises is to secure the handover of buildings, and Agile really needs to make good use of its limited capital.

Some industry insiders believe that Agile's current decision may be due to two considerations: one is to strive to promote guaranteed delivery and achieve stable and healthy enterprise development; the other is to adapt to complex market changes, seek breakthroughs in passively, and save energy for future development.

Prior to that, in order to raise funds to repay debts and secure the property, Agile took multiple measures. On the one hand, it had not acquired land for many years, but instead accelerated sales repayment and debt collection. On the other hand, it actively expanded financing and accelerated the sale of large assets.

According to incomplete statistics from Wall Street News, last year, through multiple share placements, asset sales, term loan financing, etc., the cumulative supplementary capital was about 10 billion yuan, including selling the Kuala Lumpur project in Malaysia at a loss of nearly 80 million US dollars and withdrawing from 2 Changzhou projects.

The most recent one was in March of this year, when Agile sold Jiangsu Hilmei property, returning 329 million yuan in capital.

The results are remarkable. By the end of 2023, Agile's total interest-bearing debt was $53.55 billion, a decrease of nearly 6 billion yuan in one year.

At the same time, Agile has always insisted on “handing over the building.” In 2023, Agile delivered more than 72,000 homes in 60 cities and 120 projects. As of April 2024, Agile's various project groups have resumed work as scheduled at 98%.

As the survival strategy changed, Agile also adjusted its next plans. Agile said it will develop comprehensive debt management solutions for overseas debts and maintain active communication with creditors. Currently, Agile currently holds a total of 9 US dollar bonds, totaling US$3.647 billion.

In addition to this, Agile will also strive to maintain the normal operation of the company and promote “guaranteed delivery” of all projects. At the same time, pre-sale and repayment of properties are expedited in order to do our utmost to improve the balance and liability situation.

The relevant person in charge of Agile said that Agile will comprehensively sort out the construction management nodes of each city and project to “fully guarantee the delivery cycle and comprehensively guarantee the quality of delivery” for difficult “guaranteed delivery” projects.

In a complicated situation where current policy warming is blowing frequently and market expectations are improving, housing enterprises choose debt restructuring to save cash flow to ensure delivery and operation. Waiting for a turnaround in the market is not a solution.

Some investors said that taking advantage of the current environment and using policies to promote debt restructuring, once the future of operations improves, there will be an opportunity to get back on track. Based on Agile's previous performance in the open market, investors will still be willing to believe in it after the market recovers, which is beneficial to the restoration of its credit.

Agile is also hopeful for the future, and said that although there is a discrepancy between market recovery and corporate expectations, the company has maintained normal operation and steady development. With the recent introduction of real estate market policies, it also maintains confidence in the Chinese real estate market.

In the midst of a storm of drastic adjustments in the industry, it is not uncommon for housing companies to initiate debt restructuring, and the market will not change the way it was in the past two years. Especially now, there are examples where many housing companies, such as Sunac, Aoyuan, and R&F, have completed domestic and foreign debt restructuring and are concentrating on improving operations.

What really determines their fate after that is their balance and liability structure, asset quality, and plans and determination to get their operations back on track after “guaranteed delivery” and debt restructuring.

Now, after making up her mind, the “tough guy” Agile is also expected to break through the fog in front of her eyes and break out of the sky.