Zhejiang’s DunAn Group Succumbs to 45bn Yuan Debt Crisis

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The 45 billion yuan-debt woes of Hangzhou-based DunAn Group has prompted concerted intervention from the Zhejiang province government.

On 2 May the Zhejiang province finance office convened a meeting of financial institutions including the local branches of the People’s Bank of China, the China Banking Regulatory Commission and the China Development Bank, to discuss methods for resolving Dun’An’s ongoing debt crisis.

The move comes just after¬†Zhejiang Dun’an Artificial Environment Equipment announced the cancellation of its bond issue scheduled for 3 – 4 May, citing a shift market conditions.

The DunAn group succumbed to funding difficulties after China launched its concerted deleveraging campaign in 2017, leading to a scarcity of funds, a rise in financing costs and difficulty issuing bonds. DunAn chewed with a  huge volume of its own cash subsequently, resulting in severe liquidity issues.

According to 21st Century Business Herald the DunAn Holding Group currently has debts in excess of 45 billion yuan, most of which consist of loans from bank and non-bank financial institutions situated in Zhejiang province, aside from an estimated 12 billion yuan in corporate bonds.

Its creditors reportedly include the Zhejiang branches of China Development Bank, Exim Bank of China, and all of China’s big-five state-owned banks, as well as China Zheshang Bank (Zhejiang’s only joint-stock commercial bank)- and the Hangzhou branches of Industrial Bank Co., China Minsheng and China CITIC.

The DunAn Group is a conglomerate founded in Zhejiang province in 1987, whose core operations including precision manufacturing and advanced equipment, clean energy, new materials, modern agricultural (including salmon farming) and investment management.

The conglomerate has been one of China’s 500 strongest firms for 9 years running, as well as one of its 500 strongest private companies for 16 years, taking out 283rd and 81st position respectively on the lists in 2017.

In 2017 its consolidated assets were worth 64.8 billion yuan, while it posted annual sales revenues of 58.6 billion yuan and total profits of 1.76 billion yuan.

The group hopes that the Zhejiang province group can hash out a rescue plan with China Zheshang Bank as soon as possible, potentially involving the launch of a special fund to give DunAn some provisional liquidity support by buying up its higher quality projects and swapping out some of its debt.

 

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