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A bank employee counts Chinese one-hundred yuan banknotes. The reorganisation of Peking University Founder Group will involve up to US$11.3 billion. Photo: Bloomberg

Ping An Insurance stock slammed after US$11 billion plan to reorganise assets of bankrupt Peking University Founder group

  • Ping An and Huafa Group to take up 73 per cent in new entity that will assume Founder’s assets, while 27 per cent is set aside to repay creditors
  • A separate filing in Beijing shows the restructuring could reach between 53.7 billion yuan and 73.3 billion yuan
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China has turned to the nation’s biggest insurance group and state-owned enterprises owned by two municipal governments in a 73.3 billion yuan (US$11.3 billion) deal to restructure the assets of bankrupt Peking University Founder Group.

Ping An Insurance (Group) and Huafa Group owned by the Zhuhai municipal government will take up a combined 73 per cent stake in a company called New Founder Group, according to stock exchange filings. Ping An Insurance said its life-insurance arm will pay as much as 50.8 billion yuan for its contribution.

A separate filing on the Beijing Financial Assets Exchange on Friday showed the restructuring investment agreement could reach between 53.7 billion yuan and 73.3 billion yuan.

The new company will assume the assets of Peking University Founder group involved in health care, information technology, real estate and finance, among others. Shenchao Technology, a unit owned by the Shenzhen municipality and a third member of the rescue team, will buy a separate piece known as Founder Microelectronics.

Peking University in Beijing in a May 2018 file picture. Photo: Xinhua

The consortium will pay the cash in instalments to the administrators, a liquidation team comprising representatives from the People’s Bank of China, the Ministry of Education, the CBIRC Beijing Bureau and each relevant departments of Beijing Municipal Government.

About 27 per cent equity in New Founder Group will be set aside to repay creditors under a debt conversion plan, subject to the amount of debt accepted under the bankruptcy reorganisation.

The rescue plan was put together after a court in Beijing accepted a bankruptcy petition in February 2020 to put a lid on the debt crisis at the business arm of the prestigious Peking University. The group defaulted on 34.5 billion yuan of onshore notes, according to Bloomberg, while it reneged on US$3 billion of offshore bonds that undermined the trust in so-called keepwell debentures issued by Chinese entities.

Shares of Ping An Insurance slumped 2.5 per cent to HK$82.85 in Hong Kong, the most in about two weeks, erasing HK$15.6 billion of market value. Founder Holdings jumped 85.1 per cent to HK$0.87.

“A white knight has come to save the company [Founder Group] but investors question how much the white knight will benefit” from the deal, said Stanley Chan, director of research at Emperor Securities. “Investors may also be concerned whether [Ping An] was tasked to save other companies by the authorities, leading to some selling pressure.”

“Participation in the Founder Group restructuring is an important move to further boost its strategic layout in the health care sector and actively build a health care ecosystem,” Ping An Insurance said in its filing. “The company will strive to achieve outstanding investment returns and social benefits, and further enhance the company’s comprehensive strength and corporate reputation.”

This article appeared in the South China Morning Post print edition as: Ping An loses ground in bankruptcy rescue
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