Lifan Shares Announced Judicial Restructuring: The Former "First Private Car Shares" Are Facing Delisting

On August 23, Lifan Co., Ltd. (601777. SH) issued a judicial reorganization notice that "Chongqing Lifan Finance Co., Ltd., a joint-stock company, was accepted by the court", bringing the former "first share of private automobile enterprises" back to the public view.

As early as November 25, 2010, Shanghai Stock Exchange main board market ushered in the IPO of the first private car stock Lifan shares. Compared with Geely, BYD and great wall, the representatives of China's private automobile enterprises, Lifan is neither the first to produce cars, nor the largest production capacity, nor the most famous. However, Lifan is the first private car stock IPO in the main board market.

However, different from the high-profile landing in the A-share market at the end of 2010, Lifan shares are facing the risk of delisting and bankruptcy after struggling for more than two years in bankruptcy rumors.

On August 23, Lifan Co., Ltd. announced that its controlling shareholder Lifan Industrial (Group) Co., Ltd. (hereinafter referred to as Lifan industry) received the financial notice of the participating company Lifan, and Lifan finance received the civil ruling No. (2020) yu05boshen No. 464, which was served by the court on August 21, 2020, and the court ruled that it accepted the creditor's application for restructuring Lifan finance, And designated Lifan enterprise liquidation group as the administrator.

At the same time, 10 wholly-owned subsidiaries of Lifan, including Lifan passenger cars, Lifan automobile sales, motorcycle engines, etc., and Lifan finance, which is a shareholder, have also been ruled by the court to accept reorganization.

"The acceptance of the above reorganization may have an impact on the company's long-term equity investment. Among them, if Lifan fails in financial restructuring and is transferred to bankruptcy liquidation, the company will lose the financial services provided by Lifan finance for a long time, which will have an adverse impact on the development of various businesses. " Lifan shares pointed out in the announcement.

According to the relevant provisions of the Listing Rules of Shanghai Stock Exchange (revised in April 2019), the trading of Lifan shares has been suspended for one trading day from August 24. When trading resumed on August 25, the delisting risk warning was implemented for the company's shares, which was changed to "* ST Lifan" for short, and the daily rise and fall limit of stock price was 5%.

Lifan shares pointed out in the announcement that the company has been ruled by the court to accept reorganization, there is a risk of being declared bankrupt due to the failure of reorganization.

This also means that once the company is declared bankrupt, the company will be subject to bankruptcy liquidation, and the company's shares will face the risk of delisting; even if the company's restructuring and implementation is completed, the company's subsequent operation and financial indicators do not meet the requirements of the listing rules and other relevant regulatory regulations, the company's shares still have the risk of delisting risk warning or delisting.

However, under the background of global automobile market reform under the influence of new crown pneumonia, it is still uncertain whether Lifan can turn over.

Debt is too high to return

As a matter of fact, as early as August 6, Lifan industry, the controlling shareholder of Lifan shares, applied to Chongqing No.5 intermediate court for judicial restructuring on the ground that it could not pay off its due debts and its assets were not enough to pay off all debts. It was accepted by the court on August 11.

On August 21, the Chongqing bankruptcy court announced that it would accept the bankruptcy reorganization applications of 22 Lifan enterprises, including Lifan Industrial (Group) Co., Ltd., Chongqing Lifan Passenger Car Co., Ltd., and Chongqing Lifan Automobile Sales Co., Ltd.

However, Chongqing No.5 intermediate people's court has found that Lifan shares have been unable to pay off their due debts, and the current monetary capital is 43 million yuan, and the due debts are 1.196 billion yuan. Other properties have poor liquidity and can not be realized. Therefore, it should be recognized that Lifan shares are obviously lack of solvency.

Rome wasn't built in a day. In the face of high debt, Lifan shares has a long history of financial crisis.

By the end of the first quarter of this year, Lifan Group had a total asset of 18.293 billion yuan, a total liability of 15.719 billion yuan, and a net asset of 2.575 billion yuan, with an asset liability ratio of 85.93%. By the end of the first quarter of 2020, the company's revenue was only 564 million yuan, down 74.88% year-on-year, and the net profit loss attributable to the parent company was 197 million yuan, a year-on-year decrease of 103%. The net cash flow from operating activities is - 120 million yuan.

In addition, according to the announcement issued by Lifan on August 23, 1178 lawsuits (Arbitration) involving RMB 5.037 billion are involved in the company. Among them, the total amount of litigation (Arbitration) involved in which the company (including its subsidiaries) has not been disclosed in the past 12 months is RMB 298 million.

Prior to this failure, the defendant has been sued for debt. As for many debts that have been unable to be paid back normally, Lifan shares has made it clear that there are business risks in the company, such as continuous loss, high liabilities, great decline in passenger car business, overdue large debts, freezing of large assets, more litigation (Arbitration) involved, shortage of liquidity of controlling shareholders, inability to repay raised funds, etc., and the above risks have not yet formed any Effective solutions.

"Judicial reorganization is a special legal procedure to rectify the production and operation of debtors with business ability and to clear up the relationship between creditor's rights and debts, so as to get rid of financial difficulties and regain the business ability. In bankruptcy and reorganization, the rights and interests of creditors in bankruptcy and reorganization are generally higher than those in bankruptcy and liquidation On August 24, a person familiar with the enterprise bankruptcy law of the people's Republic of China told reporters of the 21st century economic report.

At present, it is difficult to pay off the debts and large losses of the above-mentioned people, such as the debt and large amount of shares. However, the basic strength of Lifan's motorcycle business is still strong and has the shell of a listed company, so it should be considered that it has a certain value and possibility of restructuring.

As the former "king of domestic motorcycles", Lifan Co., Ltd. once pointed out in the annual report of 2019 that Lifan concentrated resources to develop advantageous industries, and the motorcycle industry returned to the main business of the company. Taking the implementation of the national four standards as an opportunity, through closed operation, the production and sales of motorcycles and Tongji were expanded, and the hematopoietic function of the company was enhanced.

Failure in car building

In particular, the company has been faced with a significant decline in the sales volume of passenger cars and passenger cars in the face of a significant decline in the sales volume of passenger cars and passenger cars.

According to the data, since entering the passenger car market in 2003, Lifan has launched a total of 28 models of various types of vehicles. Now only one model is on sale, and 27 models are out of production or off sale.

On August 15, Lifan Industrial (Group) Co., Ltd. released the production and sales express of Lifan industry (Group) Co., Ltd. in July 2020, from January to July this year, the sales volume of Lifan traditional passenger cars was only 1168, with a sharp drop of 94.55%; the cumulative sales of new energy vehicles were 612, with a year-on-year decrease of 57.62%; but the cumulative sales volume of motorcycles in the first seven months was 287500, a year-on-year decrease of 17.85%.

In the view of industry insiders, Lifan has not formed its own core competitiveness and product strength in the field of traditional passenger cars, new energy vehicles, or the hot shared automobile industry.

"At the same time when Lifan motor started, a large number of private automobile enterprises, such as Geely and great wall, were born in China, but the market differentiation was very obvious." On August 24, Zhong Shi, an auto analyst, pointed out in an interview with the 21st century economic reporter that the reason why Lifan has moved to the edge is also closely related to the lack of R & D capability, non-specific car manufacturing, excessive "speculation" and lack of sustainable development strategy.

In addition, Lifan shares behind this problem, is China's overall auto industry transformation and upgrading background, the acceleration of the market elimination competition is a microcosm.

As early as October 2019, four enterprises, including cheetah, Zhongtai, Huatai and Lifan, were investigated by banks for internal risks. Although the "bankruptcy rumor" did not end, the industry continued to "shuffle" due to the continuous downward trend of the auto market, and the survival space of many third and fourth tier brand automobile enterprises is being squeezed.

The company has been on the verge of bankruptcy for many times. In January 2017, in order to save money, Lifan sold 90% of the equity of Chongqing Lifan football club to Wuhan contemporary science and Technology Industry Group Co., Ltd.; in December 2018, Lifan sold its passenger car production qualification to ideal car at a price of 650 million yuan, and sold the production base of 150000 passenger car projects located in Liangjiang New Area.

However, from the current operating situation of Lifan shares, Lifan automobile has not come out of the predicament.

"With the deterioration of the external business environment, the elimination speed of the last automobile industry has accelerated. In this round of external pressure, the edge of the car companies will be slowly out of the game. " In Zhong Shi's opinion, Lifan has been basically out of the auto industry, but if you can do a good job in motorcycles, it is possible to turn over.

"They will either transform or change their business, and these enterprises will basically withdraw from the automobile industry. If you still want to survive in the automobile industry, it is likely that the rate will be acquired by others, or become a part of other automobile enterprises. At present, the possibility of marginal enterprises reviving is almost zero. " Zhong Shi finally said.

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