Three consecutive zero-bid failed auctions! Does this financial institution's equity have no takers?

Questioning AI · How governance loopholes behind a 99.15% NPL rate in Huayun Financial Leasing could lead to a crisis?

After financial leasing companies such as Aerospace Financial Leasing (now Hongtai Xinhang Financial Leasing), Tianfu Financial Leasing, and others recently completed share transfers, Huayun Financial Leasing’s equity disposal process has temporarily stalled: three price adjustments, three failed auctions.

The Financial Times reporter noted that the 21% stake held by Taifu Heavy Equipment Group in Huayun Financial Leasing was recently publicly auctioned on JD Asset Trading Platform. After three rounds of price reductions—300M yuan, 240M yuan, and 2 billion yuan—the auction ultimately failed. The 21% equity corresponding to a paid-in registered capital of 200M yuan was discounted by over 30% but still attracted no bidders.

From the bright start as the first purely private financial leasing company to a non-performing rate once as high as 99.15%, the failure of Huayun Financial Leasing’s equity auction reflects the development difficulties caused by governance failures and risk out-of-control in some financial leasing firms.

Market analysts believe that highly dispersed shareholding and the absence of a controlling shareholder are core obstacles to risk disposal and equity restructuring for Huayun Financial Leasing. Public information shows that Huayun Financial Leasing currently has six shareholders. Huaxun Fangzhou Technology holds 30% and is the largest shareholder. Taifu Heavy Equipment Group and Xiehe Wind Power Investment each hold 21%, ranking second, with no single shareholder holding more than 51%.

Reviewing the entire process from rapid expansion to risk outbreak, Huayun Financial Leasing’s risks fully surfaced in 2023. At that time, major shareholder Huaxun Fangzhou Technology auctioned its 30% stake. The first comprehensive valuation report disclosed Huayun Financial Leasing’s financial condition: from December 2020 to July 2023, its asset size shrank sharply from 300M yuan to 8B yuan; operating income declined for three consecutive years, from 43.8174 million yuan in 2020 to a loss of several million yuan. More notably, by the end of July 2023, its non-performing loan ratio soared to 99.15%. In comparison, industry data shows that at the end of 2023, the average non-performing rate for financial leasing companies was 1%, ranging between 0.02% and 2.72%.

Industry insiders say that governance gaps caused by dispersed shareholding can easily lead to a situation where no one controls or is responsible, making it difficult to ensure scientific decision-making and effective risk control systems.

In fact, the auction failure of the stake held by Taifu Heavy Equipment Group is accompanied by more uncertainties. Auction notices show that six related companies, including Taifu Heavy Equipment Group, have entered bankruptcy proceedings. The administrator has not only failed to grasp Huayun Financial Leasing’s actual operations and asset-liability status but also remains unclear whether the company has employees or assets. The asset condition behind the shareholding remains a mystery, deterring potential buyers.

Huayun Financial Leasing’s restructuring is an essential step under strict regulatory conditions to strengthen risk prevention in the financial leasing industry, optimize services, and promote high-quality development of the real economy.

The “Regulations on the Administration of Financial Leasing Companies” (hereinafter referred to as the “Regulations”), which will be implemented in November 2024, directly targets industry pain points such as dispersed shareholding and weak risk control. The Regulations will significantly raise the minimum shareholding requirement for main investors from 30% to no less than 51% of all equity, and explicitly set the minimum registered capital at 1 billion yuan.

Regulators have clarified that this move aims to reinforce shareholder responsibilities, prevent issues caused by overly dispersed shareholding leading to governance failure and imbalance; define major shareholders and actual controllers of financial institutions, and prevent problems such as shareholders circumventing regulations through nominee holdings, concealing control relationships, or engaging in illegal manipulation and asset stripping, thereby enhancing the industry’s overall risk resistance.

The core of financial leasing is risk control, and sound corporate governance is the foundation of risk control. The model of dispersed shareholding and absent shareholders can no longer meet strict regulatory requirements. Industry insiders say that for small- and medium-sized financial leasing companies, the way forward is to identify niche segments, develop specialized expertise, improve governance structures, and strengthen risk control; for the entire industry, as regulatory policies are implemented, companies with poor governance and weak risk management will ultimately be eliminated by the market. Increasing industry concentration will also promote the return of financial leasing to its original purpose of serving the real economy. In the new round of industry reshuffling, only those institutions that maintain strict risk controls and align with regulatory guidance can operate steadily and achieve sustainable development by truly serving the real economy.

Source: Financial Times Client

Reporter: Li Pei

Editor: Liu Nengjing