LONDON — Ruyi Group, previously known as Shandong Ruyi, the parent company to Sandro, Maje, Claudie Pierlot, Lycra, Aquascutum, Kent & Curwen, Gieves & Hawkes and Cerruti, lost its key backer amid a hostile market environment.
The state-owned Jining City Urban Construction Investment Co., Ltd., which promised Ruyi Group a 3.5 billion renminbi, or $495 million, investment last year, said on Monday that the deal is off. It will retain 0.01 percent of Ruyi’s share for 1 renminbi, and return the remaining 25.99 percent stake to Ruyi.
The investment was supposed to provide a much-needed cash injection and an endorsement from the local government, as Ruyi is facing serious debt issues.
Moody’s downgraded Ruyi again in March to Caa3 from Caa1 with a negative outlook. The company has been downgraded three times in the past 12 months.
Chenyi Lu, vice president and senior credit officer at Moody’s, said the recent downgrade reflected Ruyi’s tightening liquidity position and elevated refinancing risk amid increased economic uncertainty, with sizeable upcoming maturities over the next 12 to 18 months.
At the end of September 2019, Ruyi’s cash, including pledged deposits of 8.8 billion renminbi, and Moody’s forecast of cash flow from operations of 1.8 billion renminbi for the next 12 months, were insufficient to cover its maturing debt of 11.5 billion renminbi, bills payable of 5.0 billion renminbi, and estimated maintenance capital spending of 100 million renminbi over the same period.
Ruyi’s inability to pay its international investments in time has caused Israeli men’s wear brand Bagir and Japanese apparel firm Renown to file for bankruptcy protection this year. The latter posted a net loss of 6.7 billion yen in the March-to-December period in 2019 after failing to collect 5 billion yen in outstanding debts from a Hong Kong-based affiliate of the Ruyi group.
In a recent interview with the local press, Yafu Qiu, chairman of the company, said Ruyi Group no longer wants to be China’s LVMH Moët Hennessy Louis Vuitton and the group will focus on restructuring its portfolio, high-tech fabrics, automated production and fashion brand management to improve its profitability, instead of global acquisitions.
Qiu offered no update on the pending deal with Bally.