Jinxin Fertility (01951) has announced that it intends to launch an asset-backed special scheme and expects to issue asset-backed securities to be listed and transferred on the Shanghai Stock Exchange (subject to SSE approval), aiming to securitize the underlying assets held by Hengyu, an indirectly wholly-owned subsidiary of the company, and to raise funds for the operation and development of the group's business.
The company and the project manager have submitted an application to the SSE for the asset-backed special scheme. The company will appoint the project manager as the project manager of the asset-backed special scheme.
In connection with the proposed issuance of asset-backed securities, Sanya Jinshu (as seller), an indirectly wholly-owned subsidiary of the company, the project manager (acting as project manager and on behalf of the asset-backed special scheme as buyer), and Hengyu (as target company) intend to enter into an equity transfer agreement, under which Sanya Jinshu will conditionally agree to transfer all of the equity of Hengyu to the asset-backed special scheme to be managed by the project manager on the relevant terms and conditions.
The total fundraising size of the asset-backed securities expected to be issued is approximately RMB 1.93 billion, estimated by reference to, among other things, the value of the underlying assets to be included in the asset-backed special scheme.
It is expected that upon completion and establishment of the asset-backed special scheme, the underlying assets of the asset-backed securities will include all of the equity of Hengyu and any shareholder loans owed by Hengyu in respect of the asset-backed special scheme; and the property wholly owned by Hengyu.
Upon completion of the equity transfer agreement, Hengyu will cease to be a subsidiary of the company, and accordingly its financial results, assets and liabilities will no longer be consolidated into the group's accounts. This will enable the group to unlock the investment value and optimize its capital allocation, while retaining continued economic participation in Hengyu through the company's indirect minority interest under the asset-backed special scheme.
The net proceeds from the proposed issuance of asset-backed securities will be used to repay the group's debts and for general working capital purposes of the group, as well as to 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.
Based on the company's preliminary assessment, the proposed issuance of asset-backed securities is expected to bring significant financial and strategic benefits to the group. Specifically, after taking into account the group's proposed subscription of approximately 20% of the asset-backed securities and other transaction arrangements (subject to SSE approval), the group expects to receive net proceeds of approximately RMB 1.2 billion.
Based on the group's financial position as of June 30, 2026, the proposed issuance is expected to significantly strengthen the group's capital structure, with the group's net debt-to-EBITDA ratio declining from approximately 2.8 times to approximately 0.9 times, thereby enhancing the group's financial flexibility and its ability to support future business development.
Despite the financial and strategic benefits of the proposed issuance of asset-backed securities, assuming the consideration under the equity transfer agreement is RMB 1.93 billion, under applicable accounting standards the company may recognize an unaudited one-off non-cash accounting loss of approximately RMB 121.5 million on a consolidated basis. This estimated loss mainly reflects the difference between the accounting value of the consideration and the carrying amount of the relevant assets, after taking into account the discounting effect of the payment arrangements under the equity transfer agreement and the capitalized interest attributable to the property (which forms part of the carrying amount of the underlying assets).
The estimated loss is determined by comparing the accounting value of the consideration with the unaudited carrying amount of the underlying assets of approximately RMB 1.997 billion as of June 30, 2026.
As the estimated accounting loss only reflects accounting adjustments related to the final transaction terms and payment arrangements under the equity transfer agreement (which remain subject to SSE approval) and the capitalized interest attributable to the property, it is non-cash in nature, will not reduce the substantial cash proceeds the group expects to receive under the asset-backed special scheme, and is not expected to affect the commercial benefits of the proposed issuance of asset-backed securities. If any accounting loss arises from the discounting effect of the final payment arrangements, the relevant accounting impact is expected to be gradually reversed during the relevant settlement periods.
The company believes the asset-backed special scheme will bring significant financial and strategic benefits to the group. Specifically, the asset-backed special scheme will enable the group to realize the value of the property and enhance the liquidity of its asset base, thereby strengthening its liquidity position, reducing leverage, and facilitating more efficient capital allocation.
The asset-backed special scheme will also broaden the group's financing channels and enhance the ability of the relevant business and other related properties to continue to access China's capital markets. Through the asset-backed special scheme, the group will be able to unlock the value of the property and allocate substantial financial resources for strategic deployment in its core business.
This is expected to enhance the efficiency and productivity of the group's capital allocation and support the continued expansion and upgrading of its business operations. At the same time, the group will retain an interest in the asset-backed special scheme, enabling it to continue to share in the returns generated by the underlying assets in the future and benefit from their potential value growth.
In addition, the asset-backed special scheme aligns with China's policy framework encouraging the revitalization of existing assets and optimization of resource allocation. After the establishment of the asset-backed special scheme, the group's net debt-to-EBITDA ratio is expected to decline significantly, which will substantially strengthen its capital structure, enhance its financial resilience and flexibility, and lay a more solid foundation for the group's sustainable long-term growth.
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