Cross-border Communication issued an announcement, and we finally know the real reason why Paton was sold!

Performance decline, debt accumulation, urgent need to fill the funding gap

The financial report shows that from 2017 to 2019, Paton's operating income was 2.425 billion yuan, 3.417 billion yuan, and 3.439 billion yuan, and its net profit was 191 million yuan, 238 million yuan, and 178 million yuan.

Paton was suddenly sold despite its good performance. At that time, many people in the industry had made some reasonable speculations.

Now, more than half a month has passed, and Cross-border Communication finally issued an announcement, revealing the background and reasons for the sale of Paton.

In 2019 , Cross-Border Link's performance had already suffered losses and its profitability began to decline. Since 2020, financial institutions have successively cut its credit lines .

Under the pressure of huge debt, funding issues have become the main reason restricting the normal operation and development of Cross-Border Link.

The main purpose of selling 60% of Paton's equity is to recover cash to fill the liquidity gap and repay debts to enhance the company's short-term and long-term debt repayment ability.

At the same time, Cross-border Communication also explained in the announcement why there was a funding problem ↓

1. Cross-border e-commerce businesses require sufficient operating funds for marketing promotion, inventory turnover, and supply chain construction.

2. Over the years, external financing has caused the company's debt pressure to gradually increase, and its short-term and long-term debt repayment capabilities have shown a downward trend.

Judging from the various reasons analyzed by industry insiders in the past, the second situation seems to have attracted more attention.

After acquiring Paton, Cross-border Link had an operating capital gap

Cross-Border Link disclosed that in order to seize the opportunity of rapid development of cross-border e-commerce, it has successively invested in Paton and other high-quality companies in the industry . From 2015 to 2018, it completed the acquisition of 100% of Paton's shares in four times with a total of 1.027 billion yuan, and the operating funds were converted into investment funds.

In order to solve the problem of funding needs, Cross-Border Link raised funds through various means such as issuing corporate bonds, bank loans, and shareholder loans.

In the second half of 2017, in order to supplement the operating capital gap caused by the acquisition of Paton shares and repay the company's loans to improve its financial situation, Cross-Border Link raised a total of 663 million yuan through a private placement of 3-year corporate bonds.

The bond matured in the second half of 2020, and the bond balance as of the time of redemption was 440 million yuan (663 million yuan issued in 2017 and 223 million yuan repurchased in 2019).

Subsequently, in order to repay corporate bonds on time and ease liquidity tensions, Cross-Border Link has added a total of 550 million yuan in loans to Shenzhen Hi-Tech Investment Group Co., Ltd. (hereinafter referred to as "Shenzhen Hi-Tech Investment"). Currently, there is still a remaining loan of 430 million yuan to be repaid in 2021.

In recent years, Cross-Border Link has always been a legend in the industry. After the sale of Paton, a large amount of cash will be added to its book assets, which will help it fill the liquidity gap and repay debts to enhance its short-term and long-term debt repayment capabilities.

After Paton is controlled by big companies such as Xiaomi and Zongteng, it may create more myths.

Cross-border communication

Cross-border e-commerce market