Zhongzhi Enterprise Group, a private investment conglomerate in China, told its investors in an open letter on Wednesday that the company is severely insolvent and faces major risks to continue operations.

According to the calculation of intermediary institutions, Zhongzhi's assets total about 200 billion yuan ($28 billion) while its total debts is between 420 billion to 460 billion yuan, said the letter.

As Zhongzhi's assets are mostly debt and equity investment, the recoverable amount is expected to be low given these assets' longer duration and higher difficulties in collection. At the same time, the resources available for debt repayment in the short term are far below the overall debt scale. Therefore, the company's liquidity is exhausted and the asset impairment has been serious, according to the letter.

While Zhongzhi has a complex industry distribution, including various business and project entities, a large number of corporate assets, related to financing and external guarantee matters still await verification and confirmation. The final asset and liability situation may be adjusted, and investors will be informed in a timely manner, the company's management team said in the letter.

Zhongzhi's actual controller Xie Zhikun passed away suddenly on Dec 18, 2021. A large number of senior executives and core staff have left their posts since then. As the group and its subsidiaries are highly dependent on the decision-making of the former controller, the internal management of the company has sunk into a state of failure, said the letter.

shijing@chinadaily.com.cn