2033 is too far away, and the collateral hotel is too cold: CITIC Bank "debt collection" from Longfor Holdings amounts to 3.7 billion

On March 19, 2026, Longguang Holdings Limited in Shenzhen announced that one of its subsidiary project companies was subjected to arbitration by CITIC Bank due to a financing contract dispute, involving a principal financing balance of 3.7 billion yuan along with corresponding interest and penalties. CITIC Bank (601998) also demanded that Longguang Holdings assume joint repayment responsibility.

This nearly 3.7 billion yuan debt recovery is just the tip of the iceberg of Longguang Holdings’ massive overdue debts, which more directly reflects the severed trust chain between this established real estate enterprise and its financial partners. The announcement simultaneously disclosed core debt data: as of February 28, 2026, Longguang Holdings and its subsidiaries had overdue and unpaid bank loans, trust loans, and targeted asset-backed notes totaling 40.67 billion yuan. Although this was a slight decrease from 41.22 billion yuan at the end of January, the overall overdue scale remained extremely high, and the core liquidity tension of the enterprise showed no substantial improvement.

The enormous debt recovery combined with the legal constraint of joint repayment responsibilities, along with the pessimistic expectations from the market, undoubtedly worsened the already cash-strapped Longguang, further locking down the remaining space for the company to maneuver its funds.

Systematic pressure on the core profit model

Longguang Group’s current operational predicament is not only influenced by the overall downturn in the real estate industry but also has deep-rooted internal causes stemming from a systematic imbalance in its core profit model.

From the latest disclosed financial data, Longguang’s previously established profit advantage based on its layout in the Greater Bay Area is showing a cliff-like decline. The company’s profit-generating capability continues to deteriorate, having long lost its self-repairing internal momentum, with the overall operational fundamentals continuing to weaken.

The rapid shrinkage of revenue scale is the most intuitive manifestation of the company’s operational slowdown. In the first half of 2025, the company achieved only 3.4 billion yuan in operating income, a sharp drop of 75.8% compared to 14.05 billion yuan in the same period of 2024. This reduction far exceeds the 50.7% decline for the entire year of 2024, signaling a clear indication of the company’s accelerating revenue contraction. More fatal than the drop in revenue is the deep negative turn and continuous deterioration of the company’s gross profit margin: Longguang Group’s gross profit margin gradually declined from 21.86% at the end of 2021 to -21.82% by the end of 2024, further worsening to -40.18% by mid-2025.

For the real estate industry, a -40.18% gross profit margin indicates that the company’s operations are in serious deficit, as every 1 yuan of property sales revenue not only fails to cover approximately 1.4 yuan of direct sales costs (with current sales costs reaching 4.77 billion yuan) but also cannot offset basic operational costs such as construction and interest expenses. The internal growth momentum of the company has essentially dried up, and relying solely on its main business to achieve profit recovery is now hopeless.

From the perspective of the balance sheet structure, Longguang Group is facing dual pressures from continuously shrinking asset values and high rigid debts, with financial leverage risks continuing to escalate. As of June 30, 2025, the company’s total assets shrank from a high of 294.1 billion yuan in 2022 to 207.2 billion yuan, a nearly 30% reduction in asset scale over three years. Meanwhile, the total liabilities remain as high as 183.7 billion yuan, directly pushing the asset-liability ratio up to 88.65%, with the net debt ratio rising to a high of 8.81 times. During an upcycle in the real estate industry, high leverage was a profit amplifier for corporate scale expansion, but in the current context of industry adjustment and revenue collapse, excessive financial leverage has shifted to become a core source of pressure accelerating asset shrinkage and profit loss for the company.

Continuous losses on the profit side further erode the company’s shareholder equity and risk resistance capability. In 2024, the company’s net profit attributable to shareholders was a loss of 6.3 billion yuan, with continued losses of 1.78 billion yuan in the first half of 2025. These consecutive large losses have caused the total equity of the company to plummet from 67.77 billion yuan at the end of 2021 to 23.52 billion yuan, with a more than 65% reduction in shareholder equity.

In terms of liquidity, Longguang’s cash flow management is also nearing its limit. By mid-2025, the company’s cash and bank balances were only 8.95 billion yuan, a more than 75% evaporation compared to 37.11 billion yuan at the end of 2021. In stark contrast is the heavy short-term debt repayment pressure, with current short-term liabilities including bank and other loans reaching 50.44 billion yuan, along with another 17.58 billion yuan in preferred notes awaiting redemption, resulting in a cash coverage ratio of less than 14% for short-term financial borrowings. Faced with over 40 billion yuan in overdue debts, relying solely on the company’s operating cash flow for self-rescue is a tremendous challenge from a financial logic standpoint.

Against a backdrop of deteriorating fundamentals, the dramatic adjustment of Longguang Group’s management team signals a clear intent to address the crisis. In August 2025, key family members, including Ji Haipeng, completely exited Longguang Holdings’ decision-making layer, with Shen Peiyong succeeding as the company’s legal representative and chairman. Public information shows that Shen Peiyong is associated with as many as 711 enterprises, and this adjustment indicates that Longguang is officially shifting from its previous family-centric management model to a professional crisis management approach, completely abandoning the growth route focused on scale expansion and fully entering a survival defense stage centered on asset disposal and balance sheet reduction.

However, currently, the company’s revenue, gross profit, and cash flow are all in crisis, compounded by multiple judicial blockades, leaving the professional management team with very limited space for asset disposal and fund maneuvering.

The breakdown of trust behind 338 lawsuits

The continued deterioration of financial fundamentals directly transmits to the company’s credit level, as Longguang Group currently faces a severe situation of concentrated judicial recovery from financial institutions, with a continuously worsening credit environment, gradually falling into the encirclement of judicial disputes.

According to the latest judicial case monitoring data, Longguang Holdings and its core subsidiaries have been involved in over 338 judicial cases, behind which is a fundamental shift in the risk disposal strategies of various creditors.

Previously, most financial institutions were in a defensive observation phase regarding Longguang’s debt issues, allowing for grace periods and silent negotiations. Now, various financial institutions have abandoned the negotiation space, opting for aggressive risk disposal measures such as judicial preservation and litigation arbitration, fully launching a recovery battle against Longguang’s underlying assets, marking a complete collapse of the trust foundation between both parties. In this centralized judicial recovery, the disposal strategies of different types of financial institutions show significant differences, creating a comprehensive encirclement.

Commercial banks represented by Zhejiang Merchants Bank and Pudong Development Bank have taken the lead in implementing intensive litigation measures. The Guangzhou branch of Zhejiang Merchants Bank has filed multiple lawsuits with the Guangzhou Intermediate People’s Court against core project companies such as Longguang Junhui in Nanhai, Foshan, Daya Bay Dongquan in Huizhou, and Longjun Guangcheng in Guangzhou, all demanding that the parent company, Longguang Holdings, assume joint guarantee responsibilities, adopting a “multi-point lawsuit, parent and subsidiary company linked accountability” strategy, with the core intention of seizing priority in debt repayment via judicial procedures.

The Chengdu branch of Shanghai Pudong Development Bank is focusing on key project companies in the southwest core area, filing lawsuits against Longguang in Nanning and Zhonghui in Chengdu, with related cases accepted by the Chengyu Financial Court, involving an execution amount totaling 51.263 million yuan.

As for state-owned banks, the Zhuhai Jinwan branch of Industrial and Commercial Bank and the Guangzhou Dongcheng branch of Agricultural Bank have filed lawsuits in Zhuhai, Dongguan, and other core areas where Longguang is deeply engaged, involving several civil first-instance cases such as (2025) Yue 0106 Minchu 28090. The judicial recovery measures from state-owned banks typically indicate that the space for debt extension and private negotiations has been largely exhausted, and Longguang’s last negotiation channel within the mainstream financial institution system has effectively closed.

The severity of this judicial encirclement is reflected not only in the sheer number of 338 cases but also in the long-term lock on the company’s future operational cash flow. Judicial scheduling information shows that many property preservation measures have execution nodes scheduled as far out as mid-2026. For instance, the preservation node for case (2025) Yue 04 Zhi Bao 528 is locked in on March 13, 2026, which means that a portion of Longguang’s future operational cash flow will be long-term subject to judicial execution, forming a lasting debt repayment constraint.

As of now, the total amount executed against Longguang Holdings and its subsidiaries has reached approximately 13.44 billion yuan, with the core entity listed as a dishonest executor and subjected to high consumption restrictions. The systemic legal risks combined with the 3.7 billion yuan arbitration from CITIC Bank have completely sealed off Longguang’s remaining refinancing and asset adjustment space, leading the company to gradually fall into a vicious cycle of “asset freezes causing liquidity break, and litigation accelerating asset depreciation.”

A difficult game of exchanging time for space

Faced with over 40 billion yuan in overdue debt pressure, Longguang Group has not passively responded but has initiated a systemic overall debt restructuring for its 21 public market bonds and asset-backed securities. The core idea is to extend the debt repayment period by transferring partial asset ownership, gaining time for the company to breathe and dispose of assets, attempting to solve the current predicament by exchanging time for space. In this complex restructuring plan, the extreme lengthening of the debt repayment period has become the most prominent feature.

For example, for the existing bond “H Long Control 01,” its remaining balance of 550 million yuan has been substantially adjusted to mature on July 10, 2033, marking an 8-year debt extension, which indirectly reflects the management’s cautious judgment on the liquidation cycle of core assets in the Greater Bay Area and the hopelessness of short-term cash flow recovery.

The core measure of this debt restructuring is to hedge part of the debt principal through an “asset-for-debt” model. Longguang Group has proposed using its core operational property assets to offset corresponding debts, attempting to lower rigid debt pressure to the greatest extent possible.

According to the results of asset allocation disclosed by the trustee, during the asset sale declaration period, Longguang intends to use core assets such as the Shenzhen Jiulongtai Hotel (29,000 square meters) to offset debts, aiming to cancel approximately 920 million yuan in principal; the subsequent concentrated asset selection declaration period is even larger, involving a total intended cancellation of principal amounting to approximately 6.27 billion yuan. The debt-for-assets package includes the Nanning Longguang Century Center Hotel (58,000 square meters), Nanning Jiuyu City Phase III land (117,000 square meters), and the 54,000 square meters of self-owned office space and 17,000 square meters of commercial assets delivered through equity transfer from Chengdu Longguang Century Center.

However, in the context of current revaluation of commercial property and weak liquidity, the creditors’ conversion of hundreds of billions in debt into hard-to-liquidate physical assets such as hotels and office buildings is more of a passive choice under the current market environment. Whether these assets can generate long-term operating rents to cover the funding costs over the 8-year extension remains uncertain and is a core concern for creditors.

In addition to asset-for-debt arrangements, Longguang previously attempted to promote batch debt clearance through trust tools, but this plan has recently encountered significant setbacks. The originally planned “Western Trust · Renew 2” and “Western Trust · Renew 4” restructuring service trusts, with application limits of approximately 2.74 billion yuan and 1.02 billion yuan, respectively, failed to establish as Longguang was forced to exercise its termination option due to the effective declared bond amounts not reaching 50% of the application limit.

This outcome directly reflects the creditors’ deep doubts about the quality of Longguang’s debt-offset assets and the repayment rate of the trust structure, effectively blocking the company’s important path to achieve batch debt clearance through trust tools and further increasing the difficulty of debt restructuring.

At the terminal stage of asset realization, Longguang attempted to supplement liquidity by publicly auctioning core project equity, but the process faced numerous setbacks. The assets intended for public auction include 100% equity of Zhaoqing Jiufeng City, 100% equity of Longguang Guilin International Health Valley, the Days Hotel in Longguang City, Huizhou, and portions of office buildings in the Nanning ASEAN Business District CBD.

According to the auction mechanism, the project’s first-round starting price is only 70% of the evaluation price from June 2025. If there is a failure to sell, the price will enter a “70% off again” downward adjustment channel, creating significant pressure for asset realization at a discount.

More critically, the Zhaoqing Jiufeng City project, which is a core asset for restructuring debt, is under judicial seizure due to engineering litigation disputes, and the physical freezing of assets directly undermines the project’s disposal value and subsequent development progress, putting Longguang’s debt restructuring into a dual dilemma of asset value depreciation and judicial encirclement.

Longguang Group’s predicament serves as a typical reflection of the deep de-leveraging cycle in the real estate industry, where high-leverage, high-expansion model firms find themselves in dire straits. The pressure of over 40 billion yuan in overdue debt, along with a lengthy resolution period extending to 2033, compounded by the 3.699 billion yuan arbitration claim from CITIC Bank, is a concentrated manifestation of its judicial encirclement and liquidity crisis.