Possible bankruptcy? Creditors apply for reorganization of Cross-border Link with a debt of 2.5 billion

Last month, Cross-Border Link was applied for corporate reorganization by its creditors. In response to various market voices, Cross-Border Link recently responded that it has not received the relevant court ruling, but if the application is approved, it may face bankruptcy risks.

One and a half years after the court ruling, Cross-border Communication was filed for reorganization due to debts

On May 10, because Cross-Border Link was unable to repay its overdue debts, creditor Yin Jie applied to the Taiyuan Intermediate People's Court for reorganization of the company, claiming that Cross-Border Link obviously lacked repayment ability but still had reorganization value, and at the same time applied for pre-reorganization registration.

On May 12, Cross-Border Link received the "Notice Letter" regarding the reorganization application.

On May 16, Cross-Border Link issued an announcement stating that it had not yet received any notification from the Taiyuan Intermediate People's Court . There was still uncertainty as to whether the application would be accepted by the Taiyuan Intermediate People's Court and whether the company would enter the pre-reorganization and reorganization procedures.

On June 16, Cross-Border Link responded again, saying that it had not received any relevant notice from the court.

In fact, the creditor of the debt in question originally belonged to someone else.

In 2021, creditor Lu Jian sued Cross-Border Communication for failing to repay the loan on time. The Shangcheng District People's Court of Hangzhou accepted the case and made a judgment on December 10 of the same year, requiring Cross-Border Communication to return the loan principal of RMB 81.82485 million to Lu Jian within ten days from the date of the judgment , pay liquidated damages or overdue interest, attorney fees, and property preservation guarantee insurance premiums .

On January 8, 2022, Lu Jian transferred all the debts he had against Cross-border Communication in the judgment to Yin Jie. However, Cross-border Communication has not paid the above amount for a year and a half. Therefore, this reorganization application was made.

Restructuring is not necessarily a bad thing for an enterprise. Many people regard restructuring as a "lifeline" for the enterprise to regain vitality.

*Note: Restructuring mainly involves business restructuring and debt adjustments for enterprises that may or have already met bankruptcy conditions but still have the hope of continuing to operate, in order to get rid of the debt crisis .

In recent years, bankruptcy reorganization of listed companies has gradually become normalized and has become one of the important ways to solve difficulties. Data shows that as of the end of 2022, there were more than 50 cases in which A-share listed companies were the subjects of reorganization , most of which brought good returns to the reorganization investors.

From the perspective of creditors, the pros and cons of reorganization depend entirely on the quality of the reorganized enterprise. If the enterprise is reborn, the rights and interests of creditors will be protected, but if it fails , the interests of creditors will be further damaged.

In addition, reorganization requires the joint efforts of both parties. The Enterprise Bankruptcy Law of the People's Republic of China clearly stipulates that a draft reorganization plan must be submitted within six months from the date the court decides on the reorganization, otherwise the reorganization procedure will be terminated and the debtor will be declared bankrupt . In other words, if the two parties cannot reach an agreement on the reorganization plan , they will face the consequences of bankruptcy liquidation.

In this regard, Cross-Border Link also issued risk warnings in its announcement documents.

1. There is still uncertainty about whether to enter the reorganization process

As of June 16, KGI has not received any relevant notice or ruling from the Taiyuan Intermediate People's Court, and there is still significant uncertainty as to whether the company will enter the pre-reorganization and reorganization procedures.

2. Stock trading may be subject to delisting risk warning

According to the relevant provisions of the "Listing Rules", if the Taiyuan Intermediate People's Court decides to accept the reorganization application submitted by the applicant, the Shenzhen Stock Exchange will implement a delisting risk warning for Cross-Border Stock Trading.

3. Stocks may be delisted

If the Taiyuan Intermediate People's Court decides to accept the reorganization application, Cross-border Communication will start the reorganization work. If the reorganization plan can be successfully implemented and completed, the company's asset-liability structure and sustainable operating ability will be improved. If the reorganization fails, the company will be at risk of being declared bankrupt. Once declared bankrupt, its shares will also face the risk of being delisted.

Regardless of whether it enters the pre-reorganization and reorganization procedures, Cross-border Communication said it will do a good job in daily production and operation management on the existing basis. But now, even if it reorganizes, when will Cross-border Communication, which has been losing money for years, be able to repay the huge debt of 2.5 billion?

The "death" of Global Easy Shopping left a mess behind, and Cross-border Link is still dragged down

Not long ago, the Shenzhen Stock Exchange inquired about Cross-Border Link’s 2022 annual report data. Since 2019, Cross-Border Link’s net profit has declined for four consecutive years, so the Shenzhen Stock Exchange questioned whether there is uncertainty in its ability to continue operations.

Cross-Border Link responded that in previous years, the poor management of its subsidiary Global Easybuy dragged down the overall revenue, while last year the loss was caused by the poor performance of its export business, mainly Zaful.

Earlier, relevant reports on Yien.com mentioned that Cross-border Link’s liabilities are increasing, and its total liabilities have reached 2.539 billion yuan by 2022. Interest -bearing liabilities have reached 1.448 billion yuan, interest expenses have reached 110 million yuan, of which overdue liabilities have reached 524 million yuan (the overdue liabilities are mainly due to the bankruptcy of Shenzhen Global).

At the same time, the financial report shows that at the end of 2022, the total amount of funds on the cross-border account with restrictions on use due to mortgage, pledge or freezing reached 17.0296 million yuan. Among them, the frozen amount related to its export business due to the joint impact of the Global Easy Shopping lawsuit reached 10.2594 million yuan, accounting for as much as 60% .

Currently, Cross-Border Link said it is resolving historical debt issues by introducing strategic investors and exploring multiple financing channels, which also coincides with the creditors' application for restructuring.

*Note: The purpose of restructuring is to rescue a troubled enterprise by clearing up creditor-debtor relationships, introducing strategic third parties, transferring entire companies and enterprises, changing owners, etc.

Today, Cross-border Link is facing many problems both at home and abroad. Internally, it is heavily in debt and has suffered losses for years; externally, the global economy is full of uncertainty and the consumer market is sluggish. Some industry insiders said, "Cross-border Link is no longer 'operable'."

After the bankruptcy of Global Easy Shopping, the scale of Cross-Border Link's export business shrank sharply. Last year , the export e-commerce revenue of Cross-Border Link, mainly ZAFUL, was 470 million yuan, accounting for only about 7% of the total revenue ( this proportion was 30.39% in 2021 ), and the net loss reached 81.6218 million yuan.

The business balance is seriously unbalanced and export business is difficult to mobilize. However, it stated on the investor platform that it is constantly trying to expand into emerging markets, while paying attention to commodities other than some traditional categories and optimizing the export business segment.

Think about the more than 10 years since its listing . The share price of Cross-Border Link has skyrocketed all the way, reaching 24.68 yuan per share at its peak , more than ten times. As of today, its share price has fallen to less than 4 yuan, and has even hit the limit down several times .

In the first quarter of this year, Cross-border Link achieved revenue of 1.587 billion yuan , an increase of 8.24% over the same period last year , and net profit of 1.2292 million yuan , an increase of 112.10% over the same period last year . Although the net profit is improving, the revenue is nearly 1.6 billion, and the net profit is only 1.23 million, which shows that its profitability is lost.

In May, there were reports that a large number of employees of Cross-Border Communication had fled the company. Although the company denied this, it is not known whether this statement was made to appease investors or was true.

Cross-border communication

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Bankruptcy