Electric Giant Bankrupt

2019-05-17

Dongying People's Court of Shandong Province has ruled recently to accept the bankruptcy reorganization applications of two local large private enterprises, namely Shandong Shengtong Group Co., Ltd. and Dongchen Holding Group Co., Ltd. It is reported that both Shengtong Group and Dongchen Holdings are located in Dongying, which are in the same regional economic circle, and the two companies have mutual guarantee relationships.



1. The signs of crisis have already been revealed. The total liabilities are 9.857 billion yuan and the asset-liability ratio is 167%.


The court ruling showed that Dongchen Group had a total assets of 5.919 billion yuan, total liabilities of 9.857 billion yuan and an asset-liability ratio of 167% as of November 30, 2018. From the financial information disclosed, after entering 2018, the performance of Dongchen Group began to decline significantly. In 2018, the operating income was 8.594 billion yuan and the net profit was 645 million yuan. The revenue and net profit in 2017 were 12.411 billion yuan. Yuan and 948 million yuan.


As early as 2018, Dongchen Group has already shown signs of crisis. In June 2018, the equity of thirteen companies under the Dongchen Group was subject to judicial freezing. The book value of assets involved was 1.16 billion yuan, and the book value accounted for 23.92% of net assets. Affected by this incident, Dagong International once listed Dongchen Group and its issued bonds as credit watch lists. Due to the recurring debt overdue and the equity freeze, the solvency of the company was weakened. Dagong International finally lowered its main credit rating to A+. After entering 2019, Dongchen Group was even entangled in lawsuits and successively enforced by the court, with the target of nearly 200 million yuan.


2. Dongchen Holdings did not complete the repayment of principal and interest on time.


On November 23, 18, Dongchen Holding Group Co., Ltd. failed to complete the repayment of the principal and interest funds of the corporate bonds “16 Dongchen 03” on the same day. The company shall transfer the principal and interest funds for sale to the designated bank account of CSI Shanghai Branch 2 working days before the payment date, but according to the company, due to “partial printed documents failed to be submitted in time” The company completed the repayment of principal and interest on November 28th. “16 Dongchen 03” was issued and issued in November 2016 with a scale of 600 million yuan. The coupon rate was 7.1% at the time of issue. The issue period was 4 years with the second year end of the sale and adjustment of the coupon rate clause. According to the results of the sale, the scale of this sale is 150 million yuan.


Except that the bonds did not complete the interest payment on time, Dongchen Holdings was listed as the untrustworthy enforcer by the People’s Court of the Kenli District of Dongying City due to the failure to repay the principal and interest of the loan to Dongying Wanghao Chemical Co., Ltd. According to the company's announcement, the company has “consented with Wanghao Chemical” and, with the consent of the court, the company has been removed from the list of untrusted persons.


Dongchen Group takes chemical industry and electromechanical as the leading industry. Under the cover of the nest, it has completed its eggs. Its subsidiary Shandong Dongchen Energy Saving Power Equipment Co., Ltd. is mainly engaged in the production and sales of transformers, and is now affected by the general trend of the group. Since the end of last November, in order to reduce cash expenditures, ease the pressure on capital, suspend its own processing and production, and all orders are entrusted to external processing. Recently, all the spot stocks were packaged and sold to Dongchen's peer and competitor Shandong Jieguang Electrical Technology Co., Ltd.


After the chemical and electromechanical group filed for bankruptcy and reorganization, it was not an easy task to turn over again. We will wait and see!