It is reported that CITIC Trust received a letter from Guangzhou City Investment Group a few days ago that it will resolve the risk of Evergrande Guangdong project by way of project surrender. If the scheme can be implemented smoothly, it will become a new mode for trust companies to resolve the risks of real estate projects after mergers and acquisitions.
At present, the downward pressure on the real estate industry has increased sharply, with both ends of supply and demand under pressure. Under the superimposed resonance of the real estate regulation and control policy, the default of the real estate enterprise debt causes the market to worry about the risk spread, and transmits in the whole industry and the real economy.
According to the National Bureau of Statistics, commercial housing sales shrank 22% from January to February 2022 compared with the same period last year, while sales of China's top 100 real estate companies fell 43% over the same period (source: Kerry).
On March 16, the Financial Stability and Development Committee of the State Council held a special meeting, which pointed out that with regard to real estate enterprises, it is necessary to study and put forward effective and effective risk prevention and mitigation plans in a timely manner, and put forward supporting measures for the transformation to a new development model. Name names to resolve the risks of real estate enterprises.
Since the second half of 2021, credit risk events of real estate enterprises have occurred frequently, a number of real estate trust projects are overdue, and a number of trust companies have encountered risk resolution problems, including Citic Trust Evergrande Guangdong Collective Fund Trust Plan.
According to CITIC Trust, since the emergence of liquidity risks in the project, the company has set up a special working group to communicate closely with Evergrande and the relevant parties of the project. in-depth docking of more than 10 large real estate enterprises, large state-owned enterprises, asset management companies, large-scale construction agencies, and so on, to seek a variety of ways to resolve the risks.
Through the way of project surrender, this plan introduces Guangzhou City Investment Group, an AAA high credit rating subject with strong performance ability, as a guarantor to pay the full principal of the trust plan by installments, so as to significantly enhance the degree of guarantee for the safe withdrawal of trust principal, so as to resolve the substantial risk of assets. Guangzhou City Investment Group is the main entity of urban infrastructure construction and asset operation in Guangzhou, and its shareholders are the State-owned assets Supervision and Administration Commission of Guangzhou Municipal people's Government (90%) and the Department of Finance of Guangdong Province (10%).
If the Guangzhou City Investment Corporation intervention disposal plan is successfully landed, it may become the first typical case of real estate project risk resolution led by local government in the trust industry through market-oriented approach. Compared with asset transfer or disposal (land transfer), the return of the project is more conducive to quickly resolve the current debt risk.
At the same time, in the process of scheme disposal, it not only gives full play to the advantages of trust companies in controlling the underlying assets, but also reflects the professional ability of active management to maximize the interests of investors and provide resource support for the subsequent revitalization of assets. In the special period of the transformation and development of the trust industry, both regulatory departments, market institutions and investors are happy to see more positive and effective ways to resolve risks to fully protect the interests of all market participants.
Under the principles and policies of promoting the healthy development and virtuous circle of the real estate industry, state-owned financial institutions take the initiative to explore innovative ways to deal with real estate risks, which is a useful practice to implement the important deployment of "stabilizing land prices, stabilizing housing prices and stabilizing expectations". In line with the financial regulatory guidance of "breaking the exchange", it plays a significant role in protecting the legitimate rights and interests of investors, boosting market confidence and stabilizing market expectations.