2015-06-08

Liaoning Fallout; Dalian Yida Rumored Bankrupt, But Govt Twice Denied Filing

Liaoning has been a focus on this blog since the provincial economy slowed sharply in late 2014. Reliant on commodities and heavy industry, Liaoning turned to real estate after natural resources peaked in 2011. Real estate investment has since collapsed and industrial production is now contracting. In October 2014, I posted Liaoning Sounds Warning on Chinese Economy. Liaoning is probably in recession if you accept the lower GDP growth figures put out by private economists. Since Liaoning is in heavily involved in the higher stages of production, its slowdown remains a major warning signal for the broader Chinese economy.

More immediately, a Hong Kong listed real estate developer in Liaoning province is said to be experiencing financial difficulty.

Dalian Yida (Bloomberg, LinkedIn) is rumored to be bankrupt. The firm is a major player in the city, with some pairing it with Wanda, dubbing them the "double Da's." The firm IPO'd last year in Hong Kong and shares recently rose from HK$2.5 to HK$3.25 before pulling back. The firm has $

China Real Estate News says Yida tried to declare bankruptcy twice in May, but was refused by the government.

Sources say only the property management division is in good shape, the rest of the firm is bankrupt.

The firm says rumors began early in the year, but they haven't found the source. The firm's spokesman says they haven't ruled out malicious slander by competitors.

A real estate analyst in Dalian says bankruptcy rumors are not unfounded. It is likely Yida is entangled with the government and issues such as creditor's rights may be involved. The two sides may be playing games, trying to position for the final resolution. Some speculate this leak of information may be from Yida itself as part of these negotiating tactics.

Another analyst says the situation is complicated and the firm may be trying to declare bankruptcy for subsidiary companies developing specific projects, such as the Blue Bay Project and possibly two others, but the rest of the firm may be in good shape.

Yida is also politically connected and the city uses protectionist policies to block outside firms. Yida took on many public projects at the behest of the government, but now that there are cash flow problems, the firm may be looking to drop this burden. The firm's annual report (excepted below) shows debt repayments in 2015 exceed cash balances at the end of 2014.

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Yida's debt maturing in 1-year (as of YE 2014) vs cash from the annual report:

Yida's financial summary from the 2014YE report:

The latest real estate investment growth figures for Liaoning:

Liaoning industrial production growth (contraction) in yellow:

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