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Shares of Zhejiang Sunriver Culture, Anhui Gourgen Traffic Construction, and Haichang Ocean Park Holdings experienced significant drops despite all three companies denying any involvement in the ongoing financial product redemption scandal linked to their controlling shareholder, Sunriver Holding Group.
As of 1:10 p.m. today, Sunriver Culture’s stock had declined by 6.4 percent, following a 3.6 percent fall yesterday. Gourgen Traffic hit the daily trading limit with a 10 percent drop both today and yesterday. Haichang Ocean Park fell 7 percent today after a 3.8 percent decrease yesterday.
These companies announced on December 7 that there have been delays in payments related to a financial product associated with a real estate collaboration project of Sunriver Group. They clarified that they are not responsible for these issues, with Sunriver Group and its actual controller, Yu Faxiang, bearing joint and several liabilities for the obligations.
Sunriver Group’s executive president explained that in the past, real estate sales alone could total between 20 billion and 30 billion yuan (approximately $2.8 billion to $4.2 billion). He noted that because their cultural tourism business was quite low-margin, real estate had been their main source of profit.
At a recent investor meeting, firms backed by Sunriver Group acknowledged they had borrowed new funds to pay off previous debts, indicating their capital chain has broken. They also revealed that real estate assets valued at around 30 billion yuan remain unsold, as reported by investors.
The company’s total assets are approximately 60 billion yuan, with liabilities around 40 billion yuan, suggesting liquidity isn’t critically impacted, but cash flow issues are at the heart of the problem, Shen previously stated.
Investors who purchased Sunriver Group’s wealth management products on the Zhejiang Zhejin Asset Operation platform expect annualized returns of 4 to 5 percent. One investor mentioned that they still have 5.5 million yuan (about $777,970) of principal that has yet to mature.
The registration records show that the total amount of Sunriver Group funds pending redemption exceeds 10 billion yuan, mostly maturing between the end of this year and the first quarter of next year.
The involved financial product’s seller, Shaoxing Chengxu, and the debtor, Shiyan Sunriver Taijihu Real Estate, are affiliated with Sunriver Holding. These entities are guaranteed jointly and severally by Sunriver Group and Yu Faxiang, according to the asset platform.
Sunriver Group’s contracted sales dropped from 6.4 billion yuan ($905.3 million) in 2023 to 3.6 billion yuan last year, and only 1.2 billion yuan in the first half of this year, according to reports.
Sunriver Group spent roughly HKD 2.3 billion (about $295.7 million) to acquire Haichang Ocean Park and become its controlling shareholder. The park has suffered losses over the past three years, totaling more than 2.3 billion yuan.
Meanwhile, Sunriver Culture posted net profits of just 370 million yuan (around $52.3 million) over the past five years.
The pledge ratio for Sunriver Culture is at 95.6 percent, while the top four shareholders of Gourgen Traffic have a combined pledge ratio of 83 percent, according to financial data provider Wind Information.
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