Source: Yicai Global  March 1

Shares in shot up by the exchange-imposed daily limit today after it was announced that two investment firms backed by the Shenzhen government will pay CNY14.8 billion (USD2.3 billion) for a 23 percent stake in the ailing Chinese retailing giant to help ease liquidity pressure.

Suning’s stock price surged 10 percent to CNY7.70 (USD1.20).

Shenzhen International Holdings will purchase an 8 percent stake and Shenzhen Kunpeng Equity Investment Management will buy 15 percent equity at a price of CNY6.92 (USD1.07) per share, Nanjing-based Suning said. Both Shenzhen International and Kunpeng Capital are owned by the Shenzhen Municipal State-Owned Assets Supervision and Administration Commission.

The move will water down Chairman and majority shareholder Zhang Jindong’s 20.86 percent stake considerably and will leave the retailer without a controlling shareholder, it added., which runs grocery and electronic stores, is mired in debt and as of September last year had racked up liabilities of CNY136.1 billion (USD21 billion). To make matters worse, over half of the 13 bonds it has issued, worth CNY5.4 billion), are due this year.

The company has been loss-making for seven consecutive years. 2020 losses are expected to widen by two-and-a-half times from 2019 to CNY3.9 billion (USD604.4 million), the firm said in an earnings report on Feb. 26.

Much of this is due to overaggressive expansion -- the company bought an 80 percent stake in hypermarket chain Carrefour China in September 2019 -- and the fallout from the Covid-19 pandemic which greatly reduced footfall to its brick-and-mortar outlets. As a result it has been forced to invest more in its online retailing and logistics businesses, adding to its liquidity woes.

Suning’s credit rating outlook has slid to ‘negative’ from ‘stable’ due to the great pressure it faces in refinancing, but its corporate credit rating will remain triple-A, said ratings firm China Chengxin International Credit Rating last month.