Jinxin Reproduction (01951) plans to launch a special asset-backed program and is expected to issue asset-backed securities

Zhitong Finance App News, Jinxin Production (01951) announced that the company plans to launch a special asset support program. It is expected to issue asset-backed securities, which are listed and transferred on the Shanghai Stock Exchange (subject to approval by the Shanghai Stock Exchange), with the aim of securitizing the underlying assets held by Hengyu, an indirect wholly-owned subsidiary of the Company, and raising funds for the operation and development of the Group's business. The Company and the project manager have submitted an application for a special asset support plan to the Shanghai Stock Exchange. The company will appoint a project manager as the project manager for the special asset support plan.

As far as the proposed issuance of asset-backed securities is concerned, the Company's indirect wholly-owned subsidiary Sanya Jinshu (as the seller), the project manager (acting as the buyer on behalf of the special asset support plan) and Hengyu (as the target company) draw up an equity transfer agreement. Sanya Jinshu will conditionally agree to transfer all of Hengyu's shares to the asset-backed special plan to be managed by the project manager in accordance with the relevant terms and conditions.

It is estimated that the total amount raised in asset-backed securities to be issued is approximately RMB 1.93 billion, based on reference (including) the value of the underlying assets to be included in the asset-backed special plan.

It is anticipated that upon completion and establishment of the asset-backed special plan, the underlying assets of asset-backed securities will include all of Hengyu's shares and any shareholder loans owed in connection with the asset-backed special plan; and the property wholly owned by Hengyu.

After the equity transfer agreement is completed, Hengyu will no longer be a subsidiary of the Company, so its financial performance, assets and liabilities will no longer be incorporated into the Group's accounts. This move will enable the Group to release the value of its investment and optimize its capital allocation, while retaining the Company's interest in continuing economic participation through the Company's indirect minority interests under the special asset-support plan.

The net proceeds from the proposed issuance of asset-backed securities will be used to repay the Group's debts, use the Group's general working capital, and raise funds for the operation and development of the Group's business, including but not limited to the continued development of its core medical network, full-cycle patient management system, and clinical and digital capabilities.

According to the Company's preliminary assessment, it is expected that the proposed issuance of asset-backed securities will bring significant financial and strategic benefits to the Group. Specifically, after taking into account the Group's proposed subscription of approximately 20% of asset-backed securities and other trading arrangements (subject to approval from the Shanghai Stock Exchange), the Group expects to collect approximately RMB 1.2 billion in net proceeds. According to the Group's financial situation as of June 30, 2026, it is expected that the proposed issuance will significantly strengthen the Group's capital structure. The Group's net debt to EBITDA ratio will drop from about 2.8 times to about 0.9 times, thereby enhancing the Group's financial flexibility and ability to support future business development.

Although the proposed issuance of asset-backed securities brings financial and strategic benefits to the Group, assuming that the consideration under the equity transfer agreement is RMB 1.93 billion, according to applicable accounting standards, the Company can confirm an unaudited one-time non-cash accounting loss of approximately RMB 121.5 billion on a comprehensive basis. This projected loss mainly reflects the difference between the accounting value of consideration and the book value of the relevant assets after taking into account the discounting impact of payment arrangements under the equity transfer agreement and capitalized interest attributable to the property (the capitalized interest forms part of the book value of the underlying asset). The estimated loss was determined by comparing the accounting value of the bid with the unaudited book value of the underlying assets of approximately RMB 1,997 million as of June 30, 2026. Since this estimated accounting loss only reflects accounting adjustments relating to the final transaction terms and payment arrangements under the equity transfer agreement (still subject to approval by the Shanghai Stock Exchange) and capitalized interest attributable to the property, it is essentially non-cash and will not reduce the large amount of cash proceeds the Group expects to collect under the asset-backed special plan, and is not expected to affect the commercial interests of the proposed issuance of asset-backed securities. If there is any accounting loss due to the discounting effect of the final payment arrangement, the accounting impact is expected to be gradually reimbursed during the relevant settlement period.

The Company believes that the special asset support program will bring significant financial and strategic benefits to the Group. Specifically, the special asset support program will enable the Group to realise the value of the property and increase the liquidity of its asset base, thereby strengthening its liquidity position, reducing leverage ratio, and promoting more efficient capital allocation. The special asset support program will also broaden the Group's financing channels and enhance the ability of related businesses and other related properties to continue to enter the Chinese capital market.

Through the special asset support program, the Group will be able to unleash the value of the property and allocate significant financial resources for strategic deployment of the core business. This move is expected to improve the efficiency and productivity of the Group's capital allocation and support the continued expansion and improvement of its business operations. At the same time, the Group will retain the interest in the asset-backed special plan so that it can continue to share the returns generated by the underlying asset in the future and benefit from its potential value growth. Furthermore, the special asset support program is in line with China's policy framework to encourage the revitalization of existing assets and the optimization of resource allocation. After the establishment of the special asset support plan, it is expected that the Group's net debt to EBITDA ratio will drop significantly, which will substantially strengthen its capital structure, enhance its financial resilience and flexibility, and lay a more stable foundation for the Group's sustainable long-term growth.