CEFC China Energy, whose founder has reportedly been detained for questioning, is said to be selling properties in mainland China, Hong Kong, the US and Europe valued at over RMB 20 billion ($3.2 billion) as it struggles to repay debts of RMB 117 billion ($18.6 billion).
The troubled energy conglomerate is planning to sell nearly 100 properties across the globe, according to a Bloomberg account that cited people familiar with the matter. The assets on the block are said to include CEFC’s headquarters in Shanghai’s Xuhui District, office space in Hong Kong’s Wan Chai district and a condominium at the Trump World Tower in Manhattan, along with hotels, residential apartments and industrial facilities.
The energy firm’s potential disposal of its global property portfolio comes as the Chinese government tightens scrutiny of conglomerates like Anbang Insurance Group and HNA Group for their debt-fueled cross-border shopping spree.
Hong Kong Portfolio on Sale at 30% Discount
CEFC’s closeout sale appears to have already kicked off in Hong Kong, where the company has put on the market four floors in Hong Kong’s Wan Chai Convention Plaza, a luxury house and four units in upscale Residence Bel-Air in Pok Fu Lam, and a house in the New Territories, according to a report in the Apple Daily. The conglomerate’s total asking price of HK$3 billion ($149 million) for its Hong Kong assets, is said to represent a 15 to 30 percent discount from their market value of HK$2 billion to 2.5 billion.
CEFC made headlines in Hong Kong in 2016, when it paid HK$1.4 billion ($177 million) to buy three office floors overlooking Victoria Harbour at the Wan Chai Convention Plaza, where the company had already purchased a floor in 2010.
Founded in 2002 as a crude oil trading firm, CEFC emerged from obscurity through high-profile overseas acquisitions, most notably a $9.1 billion attempt to buy a 14.2 percent stake in Russian oil giant Rosneft last September. That deal, which would have made the Chinese company one the largest shareholders in the world’s biggest listed petroleum firm, has since been stalled.
In recent years, CEFC stretched beyond energy to invest in real estate both at home and abroad. An affiliate of CEFC joined seven other strategic investors to shell out RMB 30 billion ($4.3 billion) for a combined 13.16 percent stake in Hengda Real Estate, the property unit of developer China Evergrande in January of last year.
CEFC Squeezed by Banks as Regulators Close In
CEFC’s panic sale in Hong Kong comes soon after the company is said taken out short-term loans from non-traditional lenders at annual interest rates of up to 36 percent, according to a Reuters account. After CEFC borrowed the equivalent $158.00 million at a daily rate of 0.1 percent in January, along with other short-term loans, the conglomerate now has about RMB 44 billion ($6.94 billion) of short-term debt coming due by the first half of this year, according to a 2017 disclosure cited by Reuters.
CEFC had total debts of RMB 117 billion as of June 2017, versus total assets of RMB 169 billion, and the company claimed $42 billion of revenue in 2015.
The company’s founder Ye Jianming was confirmed to have stepped down from the company’s management last week, following public comments from authorities in the Czech Republic, where CEFC was a major investor, that Chinese officials had indicated that Ye is under investigation.