A staggering 1.6 billion deposit has exploded, with the controlling shareholder promising to sell assets to repay the money, but the capital market is not buying it. On June 21, Oriental Group (600811.SH) once again opened significantly lower, and as of the time of writing, it has hit the daily limit down, with the latest stock price being only 1 yuan.
Oriental Group disclosed on June 18 that more than 1.6 billion yuan in deposits at Oriental Finance Co., Ltd. (hereinafter referred to as "Oriental Finance") are subject to significant restrictions on large withdrawals. The next day, the company's controlling shareholder, Oriental Group Co., Ltd. (hereinafter referred to as "Oriental Group Company"), and the actual controller, Zhang Hongwei, promised to sell assets to alleviate the liquidity pressure of Oriental Finance.
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Before the risk of the huge deposit emerged, Oriental Group's liquidity was already under severe strain. In the last three years, the company's net profit has accumulated a loss of more than 400 million yuan, and as of the end of 2023, more than 70% of its assets are in a restricted state, with unrestricted funds amounting to only 2.623 billion yuan, while the loans to be repaid within one year reach 12.7 billion yuan. After the restriction on the 1.6 billion yuan deposit, the company's financial pressure has increased sharply.
After the exposure of risks at Oriental Finance, the large amount of loans from Oriental Group at Minsheng Bank has also caused market concern. As of the end of 2023, the loan balance of Oriental Group and its affiliated companies at Minsheng Bank is close to 9.6 billion yuan.
Oriental Group is caught in a financial predicament, and the controlling shareholder, Oriental Group Company, may also be unable to help. As of the end of last December, the asset-liability ratio of Oriental Group Company reached 71.12%, and the cash to current liability ratio was only 0.18. Moreover, the four listed company shares held by the group and its affiliates are mostly in a pledged state, and after a continuous decline in stock prices, they are all below 1.6 yuan.
The liquidity crisis of Oriental Group intensifies.
Before the restriction on the withdrawal of the 1.6 billion yuan huge deposit, the liquidity of Oriental Group itself was already under extreme pressure.
Data shows that as of the end of 2023, the total amount of restricted assets of Oriental Group reached 26.981 billion yuan, accounting for 71% and 164% of the total assets and net assets of the same period, respectively. The types of restricted assets include long-term equity investments, investment properties, monetary funds, fixed assets, and other current assets, etc., which are mainly used for pledged loans.
Among them, the book balance of monetary funds is 3.179 billion yuan, with a restricted amount of 556 million yuan, accounting for 17.48%. Calculated statically, with the restriction on the 1.6 billion yuan deposit this time, this ratio may climb to over 60%.
The performance of Oriental Group is also not optimistic. Although the company achieved a business income of 413 million yuan in the first quarter of this year, a year-on-year decrease of 78.74%, and a net profit of 172 million yuan, a year-on-year increase of 78.65%, in 2021-2023, the company's net profit was a loss of 1.719 billion yuan, 995 million yuan, and 1.557 billion yuan, respectively, with a total loss of more than 4.2 billion yuan, and it is difficult to fill the debt with profits in the short term.At the same time, the short-term debt pressure on the Eastern Group continues to grow. As of the end of the first quarter of this year, the Eastern Group's total assets amounted to 37.41 billion yuan, with total liabilities of 20.81 billion yuan, resulting in an asset-liability ratio of 55.62%. The short-term liabilities stood at 6.925 billion yuan, and the non-current liabilities due within one year reached 5.765 billion yuan, including loans from Minsheng Bank. The debt that needs to be repaid within one year amounts to 12.7 billion yuan.
In an announcement on June 18, the Eastern Group admitted that the large-scale withdrawal of deposits at Dongfang Finance is restricted, which will increase the company's short-term liquidity pressure and have an adverse impact on the company's production, operation, and debt repayment capabilities.
Impacting Minsheng Bank's billion-yuan loans?
Many of the Eastern Group's loans come from Minsheng Bank.
The Eastern Group is a significant shareholder of Minsheng Bank. Before Minsheng Bank went public on the eve of its listing in 2000, the Eastern Group, along with Liu Yonghao's New Hope Group and Lu Zhiqiang's Pan-sea Group, were collectively known as the "three major factions" among Minsheng Bank's shareholder forces.
At that time, the Eastern Group and its subsidiaries signed a concerted action agreement with Huaxia Life Insurance, holding a total of 3.464 billion shares with voting rights in Minsheng Bank, accounting for a 7.91% shareholding ratio.
The concerted action relationship that lasted for more than 20 years ended in 2021. In April of that year, the three parties dissolved their concerted action relationship. According to Minsheng Bank's first-quarter report, as of the end of March, the Eastern Group held 1.28 billion shares of Minsheng Bank, with a shareholding ratio of 2.92%.
It was disclosed that since March 2014, Zhang Hongwei, the actual controller of the Eastern Group, has been serving as the chairman of the board of directors of Minsheng Bank. During this period, Minsheng Bank's exposure to loans related to the Eastern Group has been expanding.
According to Minsheng Bank's financial reports over the years, from 2021 to the end of 2023, the loan balance of the Eastern Group and its related enterprises at Minsheng Bank and its subsidiaries was 8.521 billion yuan, 8.837 billion yuan, and 9.599 billion yuan, respectively.
The short-term debt repayment pressure on Minsheng Bank from the Eastern Group is also high. According to the Eastern Group's disclosure, by the end of 2023, the group's short-term loan balance to Minsheng Bank was 650 million yuan, and the non-current liabilities due within one year were 4.526 billion yuan. This means that within one year, the Eastern Group needs to repay at least 5 billion yuan in loans to Minsheng Bank.First Financial Daily inquired about recent announcements and was unable to find the aforementioned loan overdue information. Industry insiders are concerned whether the financial pressure on Dongfang Group will affect Minsheng Bank.
Previously, Minsheng Bank had sued the bank's vice chairman Lu Zhiqiang and "Panhai Group" companies, demanding the repayment of loans. According to the recent first-instance trial results, the court ruled that Wuhan Central Business District Co., Ltd. (hereinafter referred to as "Wuhan Central Company") must repay the loan principal of 3.046 billion yuan, as well as the corresponding interest, overdue penalties, and compound interest to the Beijing branch of Minsheng Bank within ten days from the date of the judgment taking effect.
"Dongfang System" in deep trouble
Dongfang Finance and Dongfang Group's controlling shareholders are both Dongfang Group Co., Ltd., and both actual controllers are Zhang Hongwei. Dongfang Finance and Dongfang Group are facing liquidity issues, can Dongfang Group extend a helping hand?
The "Dongfang System" centered on Dongfang Group Co., Ltd., spans multiple fields. The main investments and operations are in seven major industries: modern agriculture and health food, petroleum and natural gas and new energy, information security, finance, resource products, port transportation, and new urbanization development.
The official website shows that Dongfang Group Co., Ltd. holds shares in four listed companies: Dongfang Group, United Energy Group (00467.HK), Minsheng Bank (600016.SH, 01988.HK), and ST Jin Gang (600190.SH, 900952.SH).
Public data shows that as of the end of last year, Dongfang Group Co., Ltd. held 30.11% of the shares in Dongfang Group and 0.08% of the shares in Minsheng Bank. Dongfang Group held 3.91% of ST Jin Gang and 2.92% of Minsheng Bank. Other enterprises controlled by Zhang Hongwei collectively held 66.44% of the shares in United Energy.
However, most of the shares of the aforementioned listed companies held by Dongfang Group Co., Ltd. and its affiliates are in pledge status. As of May 24, Dongfang Group Co., Ltd. and its wholly-owned subsidiary Dongfang Runlan had pledged a total of 904 million shares of Dongfang Group, accounting for 99.46% and 67.93% of their respective holdings, with pledgees including the Beijing branch of Minsheng Bank, the Beijing Zhongguancun branch of Shengjing Bank, and Harbin Bank.
Some of the pledged shares may have already fallen below the liquidation line. According to Choice data, the estimated liquidation line for the pledged shares of Dongfang Group Co., Ltd. is between 2.1 yuan and 2.3 yuan. The current stock price of Dongfang Group is only about 47%-52% of the liquidation line, all below the liquidation line.
The stock prices of these listed companies with pledged equity have also continued to decline, with market value continuously shrinking. After ST Jin Gang was exposed for financial fraud, from mid-May to June 20, the stock price has dropped from 2.65 yuan per share to 1.57 yuan per share, with a market value of only 3.144 billion yuan. United Energy Group turned from profit to loss in 2023, and the stock price fell below 1 Hong Kong dollar per share on November 14 last year. As of the close on June 20, it was only 0.56 yuan per share, with a market value of 14.58 billion Hong Kong dollars. Dongfang Group has fallen by 44% within the year, currently only 1.01 yuan per share, with a market value of only 3.7 billion yuan.Even if Oriental Group Company and Zhang Hongwei dispose of part of the shares in United Energy Group as promised to alleviate the liquidity crisis of Oriental Finance, the market value corresponding to the shares held by the group in United Energy Group does not exceed ten billion yuan at present.
Oriental Group Company itself is also facing heavy debt pressure. According to the disclosure, in 2023, the operating income of Oriental Group Company was 70.118 billion yuan, with a net profit loss of 4.83 billion yuan. As of the end of December of that year, the group's total debt was 49.028 billion yuan, with total assets of 68.933 billion yuan, a debt-to-asset ratio of 71.12%, and a cash-to-current liability ratio of only 0.18.
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