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China debt crunch

Ping An to lead $11.3bn restructuring of Peking U's corporate empire

With rescue, Chinese insurance group seeks to enhance its 'reputation'

Ping An Insurance Group expects a reputational windfall from taking part in a high-profile restructuring of a state conglomerate run by the country's top university.   © Reuters

HONG KONG -- Ping An Insurance Group and other investors have agreed to contribute to an $11.3 billion bankruptcy restructuring package to secure and rejuvenate a financially troubled corporate empire established by China's top university.

Peking University Founder Group (PKU Founder), a state-owned conglomerate founded by the university, has been in a Beijing court-supervised bankruptcy proceeding since February 2020.

On Friday, court-appointed administrators reached an agreement with Ping An and two municipal governments in the southern province of Guangdong to lead the restructuring.

According to the announcement from Ping An and the administrators on Friday night, the New Founder Group will be established based on assets held by PKU Founder and its four other affiliated companies. The new company will cover four major business segments: health care, finance, information technology and education.

The new company has yet to be formed, and few details are available.

Ping An Life, a unit of Ping An Group, and Zhuhai Huafa Group, an investment arm of the Zhuhai Municipal Government in Guangdong Province, have agreed to acquire at least 73% of the new company. The proceeds will be used to pay off creditors.

The creditors will be given a choice of receiving cash, shares in the new company or a mixture of the two. If all creditors demand repayment in cash, the investors will be required to pay a total of 73.3 billion yuan ($11.3 billion) to the administrators, in installments. In this scenario, Ping An would hold 70% of the new company's shares and Zhuhai Huafa 30%.

Shenzhen Shenchao Technology Investment -- a state investment company controlled by Shenzhen Municipal Government and the remaining party among the three investors -- is set to acquire 100% of Founder Microelectronics, an integrated circuit maker under PKU Founder Group. Why this unit is to be treated separately and other details regarding this part of the deal have not been revealed.

Ping An, which is investing a maximum of 50.75 billion yuan, said in its statement on Friday night that acquiring a majority stake in the new entity would "further boost its strategic layout in the health care sector and actively build a health care ecosystem." It apparently expects synergies with its existing business portfolio, centered on insurance and the medical business.

The Shenzhen-based company also stressed that taking part in a high-profile bankruptcy restructuring of a state conglomerate run by the country's top university, will "further enhance the company's comprehensive strength and corporate reputation."

The deal, however, still requires approval from the banking and insurance regulator as well as the court. Also, it is not all clear whether the cash injection from the investors will meet creditors' needs. According to the most recent data, the aggregate claim by 730 creditors is 249.39 billion yuan.

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