Shenzhen-based property and financial services company, Baoneng Investment Group, is the latest in a line of Chinese corporations to face a debt crisis, struggling under the weight of its RMB 200 billion ($31 billion) in liabilities, reports Caixin. The company is best known for its attempted hostile takeover of property developer China Vanke in 2015.
Baoneng faces employees demanding unpaid wages, suppliers waiting for overdue payments, and creditors seeking loan payments. The company, which obtained an RMB 12 billion strategic investment from the Guangzhou government, is trying to generate cash by selling assets and requesting more government support.
How the company ended up in this position is a familiar story in the gallery of Chinese corporate debt crises: highly-leveraged expansion into sprawling businesses. In the summer of 2015, Baoneng launched a highly-leveraged hostile takeover attempt against Vanke, then China’s largest property developer. Much smaller Baoneng managed to leverage RMB 45 billion of borrowed money to become Vanke’s biggest shareholder, but the bid failed after a regulatory crackdown, and Baoneng was forced to offload its Vanke holdings.