Securities Times reporter Luo Man

On June 29, 3TREES (603737, Stock Bar) announced that the commercial acceptance bill that was supposed to expire on March 31 this year (referred to as "commercial bills") became overdue and involved two listed real estate companies. One of the overdue bills amounted to 51.3706 million yuan, and the other overdue bill amounted to 1.4844 million yuan. Later, a real estate company with a large overdue amount responded to a Securities Times reporter that the overdue bills had been paid in early June this year.

This was an inconspicuous announcement, but it once again opened up the door for real estate companies to use commercial bills to raise funds in disguised form. There is a detail in 3Trees’ announcement. The announcement stated that the proportion of first-tier real estate developers, mainly leading real estate companies, using bills for payment has increased, which has led to the company’s continued growth in the balance of bills receivable during the reporting period.

Since bill payment is included in accounts payable and bills payable in the balance sheet, and is reflected as the company's interest-free debt, real estate companies can not only replace financing by paying bills, but also meet the "three red lines" "Under supervision, the red line (net debt ratio indicator and cash-to-short-term debt ratio indicator) can also be lowered. As a result, a large number of real estate companies have adjusted their liability structure by increasing accounts payable and bills, and expanded their use of funds from upstream suppliers.

Statistical data shows that in the first quarter of 2018, the interest-bearing debt of listed real estate companies (including short-term borrowings, non-current liabilities due within one year, long-term borrowings, and bonds payable) grew at a year-on-year rate of 24.09%. In the first quarter of 2021, this growth rate has dropped to 2.5%, and the growth rate of interest-bearing debt has shown a clear downward trend. However, notes payable and accounts payable are increasing on a large scale. As of the end of 2020, the scale of accounts payable and notes payable of listed real estate companies has increased to approximately 3.54 trillion yuan. The substantial increase in the scale of "hidden debt" of real estate companies has caused the total liabilities of real estate companies to rise instead of falling, and the solvency of real estate companies may even be overestimated.

The rapid increase in the amount of accounts payable and bills of real estate companies brings risks that cannot be ignored. It is reported that the central bank and other regulatory authorities have taken action to include the commercial invoice data of pilot real estate companies within the scope of monitoring, requiring real estate companies to report the commercial invoice data along with the "three red lines" monitoring data every month.

A reporter from Securities Times asked the relevant central bank department for confirmation on the above news, but the other party said it would not respond. In the overall tight external environment of the industry, the repayment of the "hidden debt" of accounts payable will inevitably affect the liquidity of the company and test the solvency of real estate companies and the turnover capacity of projects.

Real estate companies use bills to finance in disguised forms

Since 2018, in the face of real estate market fluctuations and continued policy controls, especially the "Three Roads" issued by supervision on August 20, 2020 In line with the "red line" policy, real estate companies have begun to adjust debt structures and optimize leverage indicators.

Statistics from Securities Times reporters show that the scale of commercial bill acceptance by real estate companies in 2020 is approximately 366.7 billion yuan, a year-on-year increase of 36.2%. The scale of commercial bill acceptance by real estate companies has increased significantly.

A real estate developer’s upstream supplier told reporters, “Currently, nearly 60% of real estate companies use commercial invoices for material procurement, project payment, etc., and 40% of real estate companies do not use commercial invoices mainly because the company’s qualifications are too poor. The liquidity is low and the market does not recognize it. The payment of commercial bills runs through the entire real estate industry chain, including bidding, development and construction, procurement, design, sales and other links.”

Since this year, there has been a crisis of unpaid commercial bills. There are many real estate companies, such as China Fortune Land Development (600340, Stock Bar), Sunshine City (000671, Stock Bar), Shandong Real Estate, Zhongliang Holdings, Rongsheng Development (002146, Stock Bar), etc., all of which have failed to pay commercial bills on time. situation.

“It is actually normal in the industry for real estate companies to postpone the payment of commercial invoices for several months, but it has not been exposed. For example, when we cooperate with Baoneng Real Estate, some projects have already been completed, but the payment may be between 1 The payment will be made after 2 years or even 2 years, but we will eventually pay for some projects. Although the profit is very low and the payment cycle is very long, we still have to cooperate." Shang Lao Wu told reporters.

One detail in the 3TREES announcement revealed that leading real estate companies usually occupy a dominant position in cooperative relationships with suppliers. The announcement stated that during the reporting period, the majority of the company's revenue growth came from the growth in revenue from the engineering wall paint business, while the company's bill receivable settlement basically came from the engineering wall paint and decoration construction business. There is a certain match between the company's notes receivable balance and the income related to engineering real estate. This is mainly due to the continuous increase in the income of the company's real estate engineering customers during the reporting period, and the increase in the proportion of first-tier real estate developers, mainly China Evergrande, using notes for payment.

Compared with bank lending and bond issuance, real estate companies' reliance on bills is actually a "credit" behavior. By squeezing upstream supplier funds, it relieves its own capital turnover pressure, which is actually disguised financing. The more powerful a real estate company is in cooperating with suppliers, the easier it is to achieve deferred payments.

But for commercial notes, note holders usually do not speak out in public channels in consideration of long-term cooperation. When the capital chain of real estate companies is tight, the priority of paying commercial bills is much lower than that of financial institutions, which means that the rights of creditors are not fully protected. During the interview, the reporter learned that it is normal for commercial note holders to not receive payment for more than 2 to 3 months, and that real estate companies generally have delays in settling payments.

According to reporter statistics, there are still a large number of real estate companies in the market that use commercial bills for settlement, including as many as 60 listed real estate companies including Vanke, Greenland, Poly Real Estate (600048, Stock Bar), Country Garden, and Sunac. . Why are commercial tickets so popular?

Zhang Dawei, chief analyst of Centaline Real Estate, analyzed to reporters that compared with financing channels such as bank loans, bond issuance, trusts and asset management, the advantage of commercial paper is that the process is simple and convenient, and does not require filing, mortgage, Complex procedures such as due diligence of intermediaries are required, and the use of funds is flexible. Secondly, commercial bills are a very good way to "account on credit" because commercial bills do not occupy the credit limit of financial institutions and are not included in interest-bearing liabilities. They have become an important factor in reducing the net debt ratio of real estate companies and the cash-to-short-term debt ratio. Way. Third, real estate financing policies tend to tighten. From the demand side to the supply side, financing channels such as bank loans, bonds, and non-standards continue to narrow, and bills have become the main financing channel for major real estate companies.

Therefore, with the advantages of scale and leading real estate companies that have a say in the upstream and downstream industrial chains, the amount of bills payable has risen rapidly in recent years. Data from the Shanghai Commercial Paper Exchange shows that the overall commercial bill acceptance balance of the top 19 real estate companies in 2020 reached 335.574 billion yuan, an increase of 36.59% from 2019, accounting for 9.27% ??of the total commercial bill acceptance in the country.

The "Three Red Lines" have suppressed the huge move of real estate companies

On August 20, 2020, the Ministry of Housing and Urban-Rural Development and the People's Bank of China jointly issued the "Three Red Lines" policy, specifically: Red line 1: The asset-liability ratio after excluding advance receipts is greater than 70%. Red line 2: Net debt ratio is greater than 100%. Red line three: Cash to short-term debt ratio is less than 1 times. According to the different contact conditions of the "three red lines", pilot real estate enterprises are divided into four levels: "red, orange, yellow and green".

Taking the scale of interest-bearing liabilities as the financing management operation target, the tiers are set to the growth rate threshold of the scale of interest-bearing liabilities. For each tier lowered, the upper limit increases by 5%. That is, if the "three lines" all exceed the threshold, "Red level", the scale of interest-bearing liabilities is capped at the end of June 2019 and is not allowed to increase; "second line" exceeds the threshold and is "orange level", and the annual growth rate of interest-bearing liabilities shall not exceed 5%; "first line" exceeds the threshold and is " "Yellow gear", the annual growth rate of interest-bearing liabilities shall not exceed 10%; "Green gear" if none of the "three tiers" exceeds the threshold, and the annual growth rate of interest-bearing liabilities shall not exceed 15%.

The specific algorithm of "Three Red Lines" is: the asset-liability ratio after excluding advance receipts = (total liabilities - advance receipts) / (total assets - advance receipts). Red line 2: Net debt ratio = (interest-bearing liabilities - monetary funds) / consolidated equity. Red line 3: Cash to short-term debt ratio = monetary funds/short-term interest-bearing debt.

It can be seen from this that in order to avoid stepping on the line, real estate companies have every incentive to adjust their debt structure. One of the methods is to move interest-bearing liabilities into non-interest-bearing liabilities such as accounts payable, bills, and other payables. account, thereby reducing on-balance sheet interest-bearing liabilities. A simple understanding is to expand the numerator and reduce the denominator, thereby reducing the explicit debt ratio indicator. Therefore, more and more real estate companies are increasing their payables to relieve financial pressure and achieve leveraged operations.

Liu Xiaoliang, a real estate analyst at S&P Credit Ratings, told reporters, "If supervision includes the commercial bills of real estate companies within the scope of the 'three red lines' supervision, I believe it will have a relatively large impact on the indicators of some companies." In the context of a tightening financing environment and the epidemic has not yet ended, it is understandable that real estate companies tend to use financial means to adjust their debt structure in response to external uncertainties. Financing channels ”

A more typical example is a leading real estate company. Its interest-bearing liabilities reached a peak of 870 billion yuan last year, but have dropped to more than 570 billion yuan in the first half of this year, a sharp increase in just one year. It will drop by nearly 300 billion yuan, thereby completing this year’s goal of “reducing interest-bearing liabilities to the prefix 5 by the end of June, and at least one red line turning green”. The real estate company said on June 30 that its net debt ratio had dropped below 100%, turning a red line into green.

However, the accounts payable and bills payable of this real estate company have increased significantly in recent years, accounting for 17.5% of the total accounts payable and bills payable of listed real estate companies. In particular, its bills payable have become one of the largest real estate companies. Finally, the total debt scale is close to 2 trillion yuan in 2020.

Wind real estate development statistics show that the total interest-bearing debt of listed real estate companies in 2018 was 7.4 trillion yuan, a year-on-year increase of 17.5%; the total interest-bearing debt in 2019 was 8.2 trillion yuan, a year-on-year increase of 10.8% %; the total scale of interest-bearing debt in 2020 was 8.6 trillion yuan, a year-on-year increase of 4.8%. Looking at single-quarter data, the interest-bearing debt of listed real estate companies increased by 24.09% year-on-year in the first quarter of 2018, and by the first quarter of 2021, it increased by 2.5% year-on-year. During the same reporting period, the operating income of listed real estate companies increased significantly, with a year-on-year growth of as high as 112.25% in the first quarter of 2021.

Data show that while the scale of operating income has increased significantly, although the scale of interest-bearing debt of listed real estate companies is still rising, the growth rate has slowed down significantly. At the same time, the scale of accounts payable and bills of real estate companies has shown a large-scale upward trend.

Reporter statistics show that the total scale of accounts payable and bills of listed real estate companies in 2018 was 2.1 trillion yuan, 2.82 trillion yuan in 2019, and this scale has reached 3.54 trillion yuan in 2020. The year-on-year growth rate reached 25.5%.

Among them, Evergrande was the highest, reaching 621.715 billion yuan, a year-on-year increase of 14.1%; followed by Country Garden, reaching 389.384 billion yuan, a year-on-year increase of 18.25%; Vanke reached 296.292 billion yuan, a year-on-year increase of 10.5%.

With the substantial increase in the scale of accounts payable and bills, the total liabilities of real estate companies have risen instead of falling. From 2018 to 2020, the total liabilities of real estate companies were 19 trillion yuan, 22.2 trillion yuan, and 24.8 trillion yuan respectively.

From another perspective, the reporter counted 100 real estate sample companies listed in the country. The median inventory turnover rate in 2020 was 0.32, which was slightly higher than the 0.3 in 2019. However, during the same period, the median value of minority shareholders' equity, long-term equity investment and other receivables of sample companies increased by 54.6%, 20.4% and 21.6% respectively year-on-year. As a comparison, the median total assets of the sample real estate companies increased by only 10.2% year-on-year in 2020.

The above data means that the overall operating efficiency of the sample real estate companies has been limited, but by significantly expanding the scale of their minority shareholders' equity, they have increased the proportion of off-balance sheet projects, thus improving the financial leverage within the scope of consolidation.

"Although real estate development companies have been affected by the 'three red lines' regulatory requirements and have reduced their on-balance sheet financial leverage to reduce the number of red lines they hit, the overall leverage improvement in the industry has been limited. Judging from the number of companies "65% of the 100 sample real estate companies have obvious signs of financial operations, which shows that using financial methods to reduce on-balance sheet leverage has become a common practice in the industry," Liu Xiaoliang said.

Be wary of deterioration in the liquidity indicators of real estate companies

As mentioned above, real estate companies reduce on-balance sheet leverage through financial means, thereby improving the core indicators of the "three red lines" to meet regulatory requirements. Wind data shows that the average net debt ratio of listed real estate companies has indeed declined. The average net debt ratio of listed real estate companies in 2020 was 70.5%, and it was 93.14% in 2019, a relatively obvious decrease. However, the average asset-liability ratio after deducting advances from advances has increased, from 51.59% in 2019 to 53.19%.

In this regard, Liu Xiaoliang analyzed that debt transfer may cause the solvency of real estate companies to be overestimated, and the repayment of "invisible debt" of payables will also affect corporate liquidity and test the debt repayment of real estate companies. capabilities and project turnaround capabilities.

What is noteworthy is that the average cash-to-short-term debt ratio of the 100 sample real estate companies has deteriorated, falling from 2.33 times in 2019 to 1.18 times last year. The deterioration of the cash-to-short-term debt ratio means that the industry's liquidity pressure has increased, and real estate companies with greater liquidity pressure are also facing operating and refinancing pressures.

Specifically, 42% of companies had lower short-term cash debt at the end of 2020 compared with 2019, and 25 of them had a cash short-term debt ratio of less than 1 times, indicating that the liquidity pressure of these companies is gradually increasing and liquidity The risk is higher. For example, Tahoe Group (000732, Stock Bar) had a cash and short-term debt ratio of 0.24 times in 2019. This ratio dropped to 0.1 times in 2020. China Fortune Land Development's cash and short-term debt ratio dropped from 0.63 times in 2019 to 0.28 times at the end of 2020.

In addition, these companies also exhibit the characteristics of low inventory turnover and high net debt ratio.

Lian Ping, chief economist of Zhixin Investment and director of the research institute, said that a low inventory turnover rate to a certain extent means that real estate companies’ sales collections are slowing down. In the context of strictly controlling the growth of interest-bearing liabilities, At the same time, sales collections cannot make up for the decline in the growth rate of interest-bearing liabilities. Once the growth rate of interest-bearing liabilities and the growth rate of sales collections decline at the same time, some real estate companies will face a greater risk of funding rupture.

Liu Xiaoliang said that if the financing environment for real estate companies continues to be tight, liquidity risk will become an important triggering factor in credit incidents for real estate companies.

The credit bonds of real estate companies this year

The pressure to repay when due is high

In fact, since 2016, the financing channels of real estate companies have become the focus of regulators control object. Since the promulgation of the “New Asset Management Regulations” in 2018, non-standard financing has continued to be tightened, further restricting the financing of real estate companies. In 2019, supervision will crack down on "front financing" and further regulate the issuance of real estate bonds and real estate dollar bonds. Since 2020, despite the issuance peak of domestic real estate bonds and overseas real estate US dollar bonds, the use of funds raised by the bonds has not been substantially relaxed. At the same time, non-standard financing channels such as the Financial Exchange have been expressly prohibited, further restricting some real estate companies. source of funds.

It is more intuitive to use data. Reporter statistics show that in 2016, the scale of domestic bond issuance by real estate companies was 870 billion yuan, the number of issuances was 929, and the net financing amount reached 798.5 billion yuan. However, from August 2020 to July 15 this year, real estate companies have had negative net financing for 10 consecutive months. Since the beginning of this year, the net financing of domestic credit bonds of real estate companies has been -290.7 billion yuan.

In terms of overseas debt, the scale of overseas debt issuance by real estate companies has been increasing since 2016, reaching a peak of US$80 billion (equivalent to RMB 520 billion) in 2019.

On July 9 of the same year, the National Development and Reform Commission issued Document No. 778 (the full name of the document is "Notice of the National Development and Reform Commission on Promoting the Reform of the Registration and Registration Management of Applications for the Issuance of Foreign Debts by Real Estate Enterprises"). The issuance of overseas bonds by real estate enterprises can only be used to replace bonds due within the next year. of medium- and long-term overseas debt, coupled with the impact of the epidemic, the scale of overseas bond issuance by real estate companies in 2020 has significantly shrunk to US$64.3 billion. In the first quarter of this year, the net increase in real estate dollar bonds was US$7.2 billion, a sharp decrease of 65% and 72% respectively compared with the first quarter of 2020 and the first quarter of 2019. Since the beginning of this year, the net financing amount of overseas bond issuance by real estate companies has been negative in 5 months. , cumulative net financing - US$5.546 billion.

What is even more difficult is that real estate companies will also face a peak period of debt repayment this year, and it is conceivable that liquidity will be tight.

Wind data shows that the total repayment volume of domestic credit bonds by real estate companies in 2021 (including maturity repayment volume, early redemption volume, and resale volume) reached a record high. As of July 15, the amount of domestic credit bonds due for real estate companies has reached 646.737 billion yuan, an increase of 126.5 billion yuan compared with 2020. The total repayment volume for the year was approximately 721.7 billion yuan, an increase of 81.4 billion yuan compared with 2020, involving 826 maturing bonds, and the pressure for repayment at maturity is high.

This is only the maturity scale of domestic credit bonds. 2021 is also the peak maturity period for overseas debt of real estate companies. Data show that as of July 15, the maturity scale of overseas debt reached US$367 (approximately RMB 249.6 billion), and the maturity scale for the whole year reached US$58.3 billion (approximately RMB 379.7 billion), involving 207 bonds. That is, the total scale of domestic and foreign bonds due this year reached RMB 1,092.4 billion.

In the context of debt repayment pressure and strict control over the growth rate of interest-bearing liabilities, real estate financial risks cannot be underestimated. In the context of preventing and defusing financial risks and the central government's senior officials have repeatedly emphasized that "housing is for living, not for speculation" and "do not use real estate as a short-term means of stimulating the economy," the highly leveraged operations of real estate companies will be difficult to sustain.

Visual China/Photo provided Data source: Wind Tabulation of this edition: Luo Man