Henglong

Biodata

Feature	Value
Name	Henglong (恒隆)
Alias(es)	Henglong Group; Henglong Holdings; Henglong Holdings Co., Ltd.; Henglong Shares 50 130 270
Organization Type	Publicly listed corporate group 44 130
Headquarters	Henglong Building, Shan City 186 229
Business	Real estate development, property management, and investments; later expands into hog farming 206 280 339
Leadership	Zhao Chen, Chairman; formerly led by Zhao Jianguo 17 212
Controlling Shareholder	Zhao Chen; holds 64.28% after transferring shares to the company for an incentive scheme 270
Listing	Hong Kong stock market 44 147
Status	Operating under Zhao Chen, with debt reduction, asset restructuring, and diversification underway 230 333
First Appearance	Mentioned through its shareholdings and pledge arrangements 2

History

Financial Crisis and Short Selling

Henglong initially has a concentrated family ownership structure: Zhao Jianguo holds 40% of its shares, while Zhao Chen holds 10%. Zhao Jianguo's shares are already pledged to their limit, prompting him to target his son's holdings for additional financing 2.

Zhao Chen instead arranges his own share pledge through Zhang Qingxue, securing HK$280 million. He prepares to short Henglong ahead of his father's arrest and the anticipated stock-price collapse. Zhao Jianguo responds to the unusual selling activity by buying shares to defend the market 4 14 16 17.

The crisis becomes public when law-enforcement officers take Zhao Jianguo away from Henglong's headquarters. Zhang Qingxue subsequently feeds financial reporters information about the company's hidden debt exposure and Zhao Chen's refusal to immediately accept the Acting Chairman position, intensifying fears of a liquidity collapse 32 36.

Zhao Chen's Takeover

Zhao Chen makes his intervention conditional on receiving at least 15% of Henglong's shares from his father, together with voting authority. Zhao Jianguo ultimately signs the transfer and voting-rights proxy after being confronted with a report identifying at least HK$3 billion in off-balance-sheet liabilities 33 38.

As Acting Chairman, Zhao Chen begins investigating the company's actual finances and pursuing balance-sheet contraction. A diagnostic report attributes Henglong's precarious position to Zhao Jianguo's aggressive expansion and Lin Wanqing's concealed financial arrangements 44 50 110.

A rights issue strengthens liquidity but produces renewed uncertainty over the father-son contest for control. Regulators verify Zhao Chen's funding sources and the issue's compliance, resolving the funding controversy without immediately settling the ownership dispute 102 147.

Audits and Governance Reform

Henglong launches a comprehensive internal audit, followed by Lin Wanqing's dismissal, the suspension of four executives, and Chen Qiming's appointment as Finance Director. These changes form part of sixteen announcements released within sixteen minutes 167 186.

At the second special shareholders' meeting of 2017, management voluntarily discloses the group's HK$3 billion off-balance-sheet exposure. Shareholders approve the new board, the Whitewash Waiver, and Zhao Chen's takeover proposals. His father's 170 million shares are subsequently transferred, formally establishing Zhao Chen as the controlling shareholder 208 209 230 233.

Asset Sales and the First Diversification Setback

The new board unanimously approves selling Henglong's property management company, directing the proceeds toward debt reduction, cash reserves, and future opportunities. Jiahe Assets acquires the business for 2.6 billion, and Henglong's share price rises sharply afterward 212 225.

Henglong then pursues Eagle Group as a possible entry into pig farming. Zhao Chen negotiates in Zhengzhou, but Jiahe secures the partnership instead. Despite the setback, Henglong's stock falls only 0.3%, while its restrained public response earns goodwill 249 250.

Haoyu Acquisition and National Day Sales

Henglong acquires all of Haoyu Construction's equity for RMB100 million, signing the transfer agreement on September 20. The acquisition brings Haoyu's debts into the group and places its operations under Henglong's financial and board supervision 266 270.

Following a RMB500 million capital injection into Haoyu, Henglong launches a 10% property discount campaign for the National Day holiday. Within five days, it clears over 60% of its low-efficiency inventory and recovers RMB580 million. Eight-day sales reach RMB830 million, placing Henglong among the holiday sales top ten within the top 100 real estate companies 274 280 281.

November Legal and Public-Opinion Crisis

Lin Wanqing publicly accuses Henglong and Haoyu of harming minority shareholders through forced dilution in three projects. She files lawsuits, requests asset preservation, and reports the companies to regulators. Separately, her three children with Zhao Jianguo challenge the validity of their father's share-transfer agreements 294.

The campaign also includes an unsupported online allegation of RMB50–100 million in unpaid taxes and mobilization of former Haoyu workers seeking overdue wages. Henglong convenes its executives, issues a brief statement, and announces a press conference. A later announcement commits Zhao Chen and Su Wantang to redeeming pledged shares, alongside Zhao Chen's three-year no-sale, no-pledge undertaking 294 297 302.

Investment in Yunnan Agriculture Group

Henglong's board unanimously approves a RMB390 million investment for a 20% stake in Yunnan Agriculture Group. The arrangement leaves operations and decision-making with the investee's team while giving Henglong a board seat and the right to appoint a Deputy Director of Finance 333.

The investment initially draws negative market reactions, but subsequent reporting identifies Henglong as Yunnan Agriculture Group's second-largest shareholder. Its relinquishment of all voting rights attached to the stake becomes the transaction's most prominent feature 335 339.

Ownership and Control

Milestone	Chapter	Details
Initial family holdings	2	Zhao Jianguo holds 40%; Zhao Chen holds 10%. The father's shares are pledged to their limit.
First transfer to Zhao Chen	33 38	Zhao Jianguo transfers 15% and signs a voting-rights proxy, giving Zhao Chen an initial route to control.
Rights issue	130 147	Four new shares offered for every ten existing shares at HK$6.20 each; Zhao Chen's increased holding creates a renewed ownership standoff with his father.
Agreement for remaining paternal stake	182 186	A further transfer covering 30.35% is announced; the transaction and Whitewash Waiver require shareholder approval.
Shareholder approval	209	The shareholders' meeting approves Zhao Chen's proposals, including the Whitewash Waiver and new board.
Transfer completed	230 233	Zhao Jianguo's 170 million shares are transferred. Zhao Chen holds 370 million shares, approximately 66.07% of issued capital.
Shares allocated for incentives	266 270	Zhao Chen transfers ten million shares to Henglong at HK$8 each. His holding becomes 360 million shares, or 64.28%, without losing control.
Pledge redemption and lock-up commitment	302	Zhao Chen and Su Wantang announce redemption of 260 million pledged shares, representing 46.4% of capital. Zhao Chen commits not to sell or pledge his holdings for three years.

Financial Condition

December 2016 Diagnostic Report

The internal report distinguishes Henglong's apparently substantial asset base from its limited immediately available liquidity 50.

Indicator	Reported Amount / Finding
Cash on hand	HK$720 million 50
Debt maturing within twelve months	HK$2.49 billion: HK$1.58 billion in short-term borrowings and HK$910 million in other liabilities due within one year 50
Total assets	Approximately HK$15 billion 50
Fixed assets	HK$6 billion, difficult to liquidate quickly 50
Construction in progress	HK$4.17 billion, requiring continuing cash expenditure 50
Inventory	HK$2.23 billion, moving slowly 50
Accounts payable	HK$2.84 billion, creating potential supply-chain pressure 50
Total liabilities including hidden obligations	Approximately HK$12 billion 50
Off-balance-sheet guarantees and hidden debt	Approximately HK$3 billion 50
Adjusted net assets	Approximately HK$3 billion after removing inflated assets and including hidden obligations 50

Debt Cleanup and Restructuring

• Hidden-debt mechanisms: Henglong's exposure includes equity-like debt, consolidation and deconsolidation of cooperative developments, sale-and-leaseback guarantees, and nested supply-chain financing 21.
• Outstanding partner guarantees: Even after projects are concluded, Henglong remains liable for approximately HK$120 million in loans owed by Qiming Jianzhu and Fengyu Touzi 58.
• Early cleanup: Lin Wanqing transfers HK$230 million to three offshore companies, enabling repayment of guaranteed bank loans and releasing approximately HK$320 million in guarantee responsibilities. Her cumulative guarantee releases exceed HK$350 million 83.
• Shareholder-meeting results: Management reports a 1.4 billion increase in net assets and a debt ratio of 51.31%, or 64.47% including off-balance-sheet liabilities 208.
• Post-sale assessment: A widely circulated investor calculation places net assets at 9.8 billion, cash reserves above 3 billion, and the debt ratio at 43.35% after the property management sale 225.
• Haoyu impact: The acquisition announcement reports a debt ratio rising to approximately 62%; pre-acquisition analysis estimates roughly 63.1% when both companies' off-balance-sheet exposures are included 263 270.

Leadership and Personnel

• Zhao Chen — Chairman and controlling shareholder; directs debt reduction, audits, asset disposal, acquisitions, and diversification 212 230 333.
• Zhao Jianguo — Former Chairman; his arrest and pledged holdings precipitate the control crisis 17 32 186.
• Zhang Qingxue — Legal Director and later board member; handles share transfers, acquisition terms, and incentive agreements 202 203 266.
• Chen Xi — Chairman's assistant and later board member; coordinates financial analysis, asset reviews, and investment due diligence 50 203 251 333.
• Chen Qiming — Initially assists with the financial diagnostic report as Deputy Director; later becomes Finance Director 50 186.
• Liu Mingyu — Board Secretary and member of the new board; manages announcements and board procedures 17 202 210.
• Song Zhongping — Chief Operating Officer; supports compliance reform and evaluates operating assets 158 160 251.
• Su Wantang — Shareholder and member of Zhao Chen's working circle; her 5% stake becomes independent public shares after her divorce. She is excluded from the board announced by Zhao Chen 120 203.
• Shen Jue — Joins the board and participates in strategic investment discussions 206 212 333.
• Sun Zhengping and Xu Yong — Independent directors who scrutinize asset-sale and investment proposals 212 333.
• Lin Wanqing — Former Finance Director; dismissed over audit-linked irregular transactions and later becomes a litigant against Henglong 186 294.
• Chen Wei — Leads Haoyu after its acquisition, subject to a five-year service commitment, financial supervision, and liability-reduction incentives 266 270 274.

Businesses and Investments

Business / Asset	Relationship to Henglong	Outcome or Terms
Real estate developments	Core operating business	National Day discounting accelerates inventory clearance and cash recovery 280 281.
Henglong Property's property management company	Former group business	Sold to Jiahe Assets for 2.6 billion 206 225.
Haoyu Construction	Wholly owned subsidiary	Acquired for RMB100 million; receives an initial RMB500 million investment 270 274.
Green Energy Technology	Existing investment under review	Retained for observation despite losses; management considers its potential, equity restrictions, and R&D-team stability 251.
Eagle Group	Proposed diversification target	Partnership lost to Jiahe Assets 249.
Yunnan Agriculture Group	Strategic financial investment	RMB390 million for 20%; Henglong becomes second-largest shareholder while relinquishing voting rights 333 339.

Governance and Operating Policies

• Balance-sheet contraction: Debt reduction and disposal of inefficient assets become board-level priorities rather than continued expansion at any cost 110 230 251.
• Financial transparency: Zhao Chen promises greater disclosure and proposes a charter prohibition on project-related transactions involving management and their related parties 209.
• Executive retention: Liu Mingyu, Chen Qiming, and Song Zhongping each receive a five-year loan-forgiveness arrangement for two million purchased shares, with 20% forgiven annually 202.
• Haoyu oversight: Major sales, asset disposals, and external investments require board approval; spending more than 5% above budget requires separate authorization 266.
• Subsidiary independence: Headquarters may provide guarantees and strategic support, but subsidiaries are expected to retain the ability to survive independently 284 285.
• Liability-reduction incentives: Chen Wei can earn one million Henglong shares for each 10% reduction in the liabilities brought by Haoyu, up to ten million shares 266.

Stock-Market Milestones

Event	Market Performance
Zhao Chen's early tenure	Opens down 5.2% and reaches an intraday decline of 8% amid doubts about his leadership 44.
Panic selling during restructuring	Falls over 12% at the open but closes down 6%, indicating institutional buying support 106.
Regulatory clearance of rights-issue funding	Closes at HK$6.64, up 1.84%, with trading volume 80% above the previous day 147.
Negotiated short-position closeout	All 100 million shares are delivered and funds received; the stock trades above net assets per share for the first time since the crash 210.
Property management sale reaction	Closes at HK$17.25, up 54.7%; daily turnover exceeds HK$1 billion 226.
National Day sales success	Reaches HK$20, four times the earlier HK$5 price 281.
Yunnan investment reaction	Opens at HK$23.20 against a previous close of HK$24.60, down more than 5.5%; management considers the resulting valuation reasonable 335.