Renowned mainland Chinese actor, Li Ya Pang, who developed the Lijiang Snow Mountain Art Town, has recently been accused by majority shareholders of filing for bankruptcy. Currently, Li Ya Pang is the second largest shareholder of the company. Legal experts in the industry have indicated that if the assets of the Snow Mountain company are insufficient to settle all debts, the equity value of the original shareholders will essentially be reduced to zero.
According to information from a mainland business and enterprise information platform, Sunlight Century Real Estate Group Limited (Sunlight Century Real Estate Group) recently submitted an application to the Lijiang Ancient City District Court requesting bankruptcy proceedings for the Lijiang Snow Mountain Investment Limited Liability Company (Snow Mountain company). The case is currently in the bankruptcy examination stage.
Public records show that the Snow Mountain company is the project company of the Lijiang Snow Mountain Art Town, with Sunlight Century Real Estate Group holding 51% of the shares in the Snow Mountain company directly and indirectly, making them the actual controlling shareholder of the project. Li Ya Pang is the second largest shareholder of the Snow Mountain company, holding approximately 27.84% of the shares.
Reported by the “Daily Economic News” on November 12th, as of now, the court has not yet disclosed the ruling content, so it is not clear whether Sunlight Century Real Estate Group’s application for bankruptcy is for restructuring or liquidation of the Snow Mountain company.
On November 11th, Bai Wenxi, Vice Chairman of the Chinese Enterprise Capital Alliance, told the media that the Snow Mountain Art Town project has been running at a continuous loss and has yet to turn a profit. At the same time, Sunac China (the parent company of Sunlight Century Real Estate Group) is facing a financial crisis, further intensifying the default risk of the Lijiang project by continuing to provide financial support, and through bankruptcy restructuring or liquidation, Sunac China aims to include all existing debts, project payments, and sales balances of the project company Snow Mountain within the judicial process, using the remaining project land and existing property assets to repay debts and avoid persistent dragging down at the group level.
Currently, the extent of the debt situation of the Snow Mountain Art Town is unclear, but it is perceived as not insignificant. Wang Yuchen, Director of Beijing Jinsu Law Firm, told the media on November 11th that in the case of bankruptcy liquidation of the project, “if all debts are repaid and there are remaining assets by the end of the liquidation, they will go back to the original shareholders.” If the company’s assets are insufficient to settle all debts, the equity value of the original shareholders will be essentially reduced to zero.
Public records show that in 2012, Li Ya Pang acquired a 27.256 hectare (about 408 acres) accommodation and catering land in Shuhe Street, Lijiang City through Snow Mountain company with a total price of 164 million yuan, with plans to develop the Snow Mountain Art Town, including villas, hotels, commercial areas, and apartments, claiming a total investment of 3.5 billion yuan.
In 2014, sales for the first phase of the Snow Mountain Art Town commenced at a price of 21,000 yuan per square meter, making it one of the most expensive real estate projects in Lijiang at the time. Despite opening for two years, only over 30 villas were sold. This forced Li Ya Pang, who was already unable to continue investing at that time, to seek out funding. In 2015, Li Ya Pang signed an agreement with Sunac China, selling 51% of Snow Mountain in Lijiang for 193.8 million yuan.