China Ocean Shipping Group Co., Ltd. (COSCO Shipping Group) recently sold its assets to raise 4 billion yuan in cash to address funding shortage pressures.
The announcement made by COSCO Shipping Group on the evening of June 7 revealed that the company sold 64.79% equity and related debt of Beijing Yiti Port Phase II for a total price of 4 billion yuan to be taken over jointly by China Life and Swire Properties. After the transaction is completed, China Life and Swire will hold equal proportions of equity, while COSCO Shipping Group will no longer have any stake in the target company.
COSCO stated that the sale of Yiti Port Phase II is expected to incur an unaudited loss of approximately 1.763 billion yuan.
Explaining the reasons for selling the equity, COSCO Shipping Group stated in the announcement that due to the downturn in the real estate market, the group is facing significant liquidity pressures and is unable to obtain financing through conventional channels.
COSCO Shipping Group is one of the real estate enterprises in the mainland that have fallen into a liquidity crisis following the current downturn in the real estate market. Its financial reports show that as of the end of 2023, its current liabilities exceed current assets by approximately 8.45 billion yuan. The group has significant short-term debt pressure, with total borrowings at the end of 2023 amounting to 961.4 billion yuan, of which around 697.5 billion yuan needs to be repaid within one year, and 110.3 billion yuan within one to two years; while its cash and cash equivalents amount to only about 1.99 billion yuan.
By the end of June 2023, COSCO Shipping Group encountered a liquidity crisis, and both domestic and foreign bond prices plummeted. In July, negotiations with bondholders on extending the “18 COSCO 01” bond began, proposing a one-year extension, and after many twists and turns, the extension plan was approved at the end of August. However, in September, it announced the suspension of payments on all offshore debts, including eight USD bonds, until a comprehensive restructuring or deferral solution is implemented. The eight USD bonds were issued by COSCO Shipping Group’s BVI companies overseas, with a combined size of 3.92 billion USD, equivalent to about 28.522 billion yuan according to the latest exchange rate.
To address the liquidity crisis, in the past two years, COSCO Shipping Group has continued to sell its assets to alleviate liquidity pressures. In June 2022, it sold the Yantai Rui Centre in Beijing’s Li Ze district for 5 billion yuan to Ping An Life Insurance, and at the end of that year, it sold 50% equity in Chengdu Yantai Taikoo Li it held to Swire Properties.
China Ocean Shipping Group Co., Ltd. was officially established in Shanghai on February 5, 2016, through the reorganization of China Ocean Shipping (Group) Corporation and China Shipping (Group) Corporation. It is a super-large centrally owned enterprise directly managed by the State-owned Assets Supervision and Administration Commission of the State Council.