In February 2010, Yi Cheng ‘s heart is still fluttering with fear when talking about 5.12 earthquake in 2008. He said that the earthquake brought about unexpected hardness to us. The non-performing assets package purchased from Industrial and Commercial Bank of China（ICBC）suffered big losses. 807 debtors are influenced by the earthquake which involved creditor’s rights of RMB 6.257b, accounted for 52.24% in the ready-to-dispose loans of 2009. The hardness of office in 2009 disposal is assets depreciation and policies to protect reconstruction area.
As manager of office, Yi Cheng felt the big pressure. But, after one year’s insistent effort, he has received a surprise. Up to Dec 31 2009, assets package from ICBC has recovered cash of RMB 610.96m, and net cash recovered as RMB 572.98m, 113.23% of planned goal of RMB 506.03m. Intermediate business was achieved as RMB 2.74m and profit of RMB 36.12m, of which profit from assets package of ICBC was RMB 6.74m. Chengdu Office has been honored as Model Corporation in 2008-2009 by China Banking Regulatory Commission (CBRC).
In the beginning of 2009, in front of losses from assets packages of ICBC, Chengdu Office made the right and timely decision on three types of assets disposal, which are to analyze value of main projects, deeply explore the value of projects, finding value of projects suffered losses in earthquake.
The corporation has classified the main projects according to their situation and disposal progress. Based on the proposal of dedicated disposal and operation from HQ, three types of assets have different requirements. For example, for common assets, it needs to be explored value with fast speed in disposal; for operated assets, based on the work of maintenance, it needs large marketing to raise assets profit; for key assets, it needs projects restructure, management schemes. In the operation, it needs innovation and exploration in order to maximum the value.
Based on these moves, the operated real assets are obvious. In regard to management of real estate property used to offset debt, it has changed the management pattern which is renting instead of management. To strengthen right management, wide marketing, it achieved the break through in business. The rent was RMB 2.41m for the whole year. This is a long-term profit earning channel. In the disposal progress, it has positively explored the operated real asset to provide accumulation for reform of offices. It has acquired the commercial real estate with an area of 9743 sqm and land with an area of 4360sqm, which are worthy of RMB 86.91m.
According to Yicheng, in front of such difficulties, we have paid a lot of attention on dedicated management. First is to build flawless account books, second is to explore the asset value, third is to recover value through dedicated disposal.
Since March 2009, leading by assets management departments, offices have built separate accounts and general accounts over assets in earthquake area, and organize the related documents. Then, these data will be sent to officials of Ministry of Finance to examine. According to regulation, every department is required to re-examine the losses loans in earthquake and improve the related documents. These moves spent three months; it has created improved and regulated documents of assets in earthquake area. In the loan losses in earthquake area, some are total losses and some are part losses. It includes direct asset losses and indirect losses caused by policy and payment willingness. They have held strong will to insist on loan in earthquake area, making dedicated investigation work , fully in use of agencies to investigate, and getting information of rest of assets to build foundation for disposal and marketing.
The office insisted on principles of different classified disposal. In regard to corporations are dissolved, or terminates its business operations, or legal person is dead, after investigation confirmed, it need to collect related documents and wait for polices return. For assets have incomplete value, we are trying to achieve cash recovered in order to avoid assets losses. For the debtors, with difficulties in repaying debt caused by earthquake, which has support to reconstruction from government and banks, such case could be postponed to dispose. This move provides more time to debtors in order to repay the debt. In regard to debtors who are able to pay the bill but refuse to do it, office will apply effective measures to collect debt. Thanks to proper measures, in 2009, office has stabilized corporations and employees in earthquake area, supporting reconstruction and reached a good result. The cash recovered is estimated to RMB 189.55m in earthquake cases. Also, the recovered right of property and capital ready to be recorded in account was RMB 98.0414m.
Local economy has been influenced by debtors. After the earthquake, the asset has been damaged with falling business performance. Also the willing to repay loan declined. We have difficulty in recovering. In respond to this issue, office has made positive cooperation with local government and transferred creditor’s right to local government. In this case, debtors might get refreshed and office could achieve value of creditor’s rights.
Some debtors suffered big losses due to earthquake and no possibility to continue manufacture. However, they have some valuable assets such like land. Taking advantage of assets management corporations in information channel, office has introduced strategic investors in cooperation with local government to reconstruct the area affected by earthquake. Meanwhile, employee has been properly organized. While the debtors are able to get up, office could also achieve the goal of disposal.
And debt reduction is the best solution to support restructure and reconstruction of corporations after earthquake. Some debtors suffered big losses with difficulty in operation, but it still has possibility to recover. Under this circumstance, the debt could be reduced according to debtor’s solvency. In this way, it not only supports the corporations to restore, but also encourage their positivity to repay the debt. Chengdu office has creditor’s rights of Chengdu Tianyi Instrument Corporation of RMB 20m, and interest of RMB 9.0233m. After earthquake, the corporations refused to talk the debt issues due to damaged operation. The project manager has been there for times and tried to analyze the consequence and solution in order to start negotiation. After consistent effort and court involvement, the corporation raised the payment of creditor’s rights from RMB 8m to RMB 12m to RMB 18m. Taking the operation situation and earthquake losses, finally office signed the debt reduction agreement with approval. The cash recovered was estimated to be RMB 18.1249m. The corporation is able to start operation due to less pressure in debt.