The bankrupt Tsinghua Unigroup is looking for a strategic investor or group to pump in ¥500 million ($77M) to its bank account as the first step in clearing its debts.
Tsinghua’s total liabilities exceed ¥200 billion ($30.8B), according to a statement it posted on China’s National Enterprise Bankruptcy Information Disclosure Platform (NEBIDP) web site. It needs to be rescued by a wealthy entity with the overall semiconductor, networking and cloud industry experience required to sort out an over-stretched and loss-making group with more than 286 subsidiaries.
The longed-for rescuer must be worth more than ¥50 billion ($37.7B) in minimum total assets, or have at least $3.1 billion in net assets, and put in a bid by September 15. All this is reported in the South China Morning Post.
Tsinghua trashes itself
Tsinghua’s nearness to bankruptcy was revealed earlier this month, when the Hong Kong-listed Huishang Bank went to court to start bankruptcy proceedings over bond debt it was owed by Tsinghua. Subsequently Tsinghua, also known as the Zinguang or Unisplendour group, posted the NEBIDP document stating its financial position.
According to this posting, the group apparently used capital from bond issues to buy a string of other companies in the six years following 2013:
- 2013 — Spreadtrum for $1.78 billion;
- 2013 — RDA for $910 million;
- 2015 — 51 per cent stake in H3C for $2.5 billion;
- Investment in Western Digital — $3.8 billion.
Tsinghua has also invested heavily in building semiconductor plants:
- Wuhan projects — $24 billion;
- Chengdu storage project — $24 billion;
- Nanjing Integrated Circuit Base (phase 1) — $10.5 billion;
- Guangzhou chip fab — $154 billion.
The income from its acquisitions couldn’t match the group’s spending commitments, so it started failing to make bond interest payments, triggering the Huishang Bank court action. Trading of six of Tsinghua’s onshore bonds stopped on July 21.
A Tsinghua Group bankruptcy restructuring exercise could be a good match with the interests and capabilities of the Bain Group, which is heavily involved in the restructuring of the Toshiba Memory Business — now called Kioxia. But would any non-Chinese investing entity be interested in rescuing a Chinese chip-making group involved in China’s march to semiconductor self-sufficiency?
How would the US government view such a course of action by a US-led investment group — particularly with China identified as the source of various hacking actions against US organisations? China’s geopolitical ambitions on the South China Sea have upset neighbouring countries such as Japan, Taiwan and Korea, and it seems unlikely companies there will be interested in helping China become even stronger.
The likelihood is that a Chinese concern — such as Alibaba — will be asked to bid for Tsinghua Unigroup and restructure it into a self-sustaining business.