Shanghai's richest man is also short of money?

On July 27, Moody's, a rating agency, downgraded Fosun International Ltd.'s corporate family rating from quote Ba2" to quote Ba3".

 Moody's said the downgrade was due to Fosun's high and increasing debt leverage; long-term investment dependent on short-term funds; low-interest coverage at the holding company level; and increased risk of credit contagion.

 On July 28, Fosun said in a related reply that the rating downgrade quote was overly pessimistic quote;, overestimated the difficulties faced by Fosun and underestimated the ability of Fosun quote; to resist anti-epidemic risk & quote;, as well as the resilience of its fundamentals and business sector structure.

 Fosun International is a listed company of Shanghai's richest man, Guo Guangchang, according to public information. According to Hurun in 2019, Guo ranked 45th with a value of 57 billion yuan.

 According to Fosun International's 2019 report, Fosun International's total liabilities are 534.757 billion yuan, net assets are 18.0924 billion yuan, and the ratio of assets to liabilities is 74.72 yuan.

 Since 2014, Fosun International's financial leverage has been above 70 percent.

 Fosun International's short-term debt-servicing risk has soared because cash and cash equivalents do not cover the short-term debt. The continuous decline of operating cash flow indicates that the ability of "hematopoiesis" is insufficient and the financing channels are smooth, which is very important to Fosun International.

High leverage, Moody's downgrades Fosun international rating outlook to negative
 Moody's downgraded Fosun International Ltd.'s corporate family rating (CFR) from & quote Ba2" to & quote Ba3". in a recent rating adjustment

 Meanwhile, Moody's downgraded Fortune Star (BVI) Limited's senior unsecured debt rating from & quote Ba2" to quote Ba3". The bonds are guaranteed unconditionally and irrevocably by Fosun International.

 Lina Choi, Moody's senior vice president, said :& quote downgrade and negative outlook reflect Moody's expectations that Fosun's business will continue to face a challenging operating environment in the coronavirus-induced economic downturn, putting pressure on its weak liquidity and maintaining a high leverage ratio over the next 12-18 months quote ;

 On July 28, Fosun Group's official public name issued a statement:" in the short term, we do not deny that Fosun International has been implicated in the epidemic, this force majeure is inevitable. The Moody's downgrade of Fosun's international rating, we believe, is the future of Fosun has an overly pessimistic presupposition or estimate ."

 The Fosun Group said that judging Fosun's actual perception of debt risk by the level of data and the change of debt structure is more like a false professional misjudgment quote

Net operating cash flow continued to decline, foreign media reported that Fosun sold rookie equity to withdraw funds

 At the holding company level, Fosun International's liquidity (measured by adjusted operating cash flow interest)/interest coverage is weak, Moody's said. Moody's expects the ratio to remain well below double over the next 12-18 months, as its recurrent income (i.e. dividends mainly from base investments) will not be sufficient to cover its interest and operating expenses.

 It is worth noting that in recent years, Fosun's net operating cash flow has been declining year after year. In the last three years, the index is 30.453 billion yuan,13.302 billion yuan, and 7.834 billion yuan respectively. It can be seen that its ability to operate and obtain the cash is deteriorating, and its ability to guarantee debt and interest is declining.

 In the case of insufficient hematopoiesis, Fosun international debt service mainly depends on external financing. However, in 2019, Fosun net international financing cash flow from net inflow to net outflow, a significant outflow of 4.754 billion yuan.

 Another sign of the deteriorating financing environment is the rise in corporate lending interest rates, which ranged from 0.5 percent to 17.65 percent in 2019 and from 0 percent to 9.8 percent in the same period in 2018.

 In addition to the income brought by the change of fair value, the actual dividend income is not enough to cover the interest expenditure. In 2018-2019, Fosun International received interest and dividends (investments) of 2.265 billion and 5.868 billion, respectively.

 Aware of liquidity problems, Fosun International took measures to speed up asset recovery, which once triggered speculation about its capital constraints.

 In June, Reuters reported that Fosun International was negotiating with Alibaba and others to sell its shares in the smart logistics network rookie for a $20 billion valuation. Alibaba, Cainiao and found declined to comment on reports of the transfer of shares.

 Cainiao's stake was acquired by Fosun International in 2013 at 500 million yuan, accounting for 10 percent. In 2019, Alibaba announced an investment of 23.3 billion yuan in capital and old shares, increasing its stake in Cainiao from about 51 percent to 63 percent, while fosun's stake was diluted.

 According to the annual report, Fosun currently holds 5.81 percent of rookie shares, which are valued at $1.162 billion.

 In addition, on the evening of July 6, Guangdong High-Speed A announced that shareholders Yadong Fosun Asian Federation intended to transfer 202 million shares of the company's shares to Shandong High-Speed Investment Development Co., Ltd., a wholly-owned subsidiary of Shandong High Speed by agreement. It accounts for 9.68% of the total share capital of the company.

 According to public information, The controlling shareholder of the Fosun Asian Union is Nangang Union, The actual controller is Guo Guangchang, Guangdong Expressway A" Cohesion quote; Because of the total price of more than 4 billion yuan in 2015 major asset restructuring. At that time, the additional price was 4.94 yuan, As of 3 July this year, Guangdong High-Speed A closed at 7.15 yuan, Based on the calculation of East Asia Fosun Asian Union holding four years floating earnings 45, It's about 446 million yuan.

 Will Fosun sell more assets to cut debt? CNMOULDING will continue to pay attention to.