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In an unusual case of a major state-owned financial institution filing an offshore lawsuit against a mainland Chinese real estate company, China Construction Bank filed a liquidation petition in Hong Kong against real estate developer Shimao.
The petition, which adds to a number of similar lawsuits in the region against China's embattled developers, is worth HK$1.6 billion (US$200 million), according to documents filed by Shimao with the Hong Kong Stock Exchange. ), the document filed by Mr. Shimao with the Hong Kong Stock Exchange does not provide any further details. detail.
The Shanghai-based company, which defaulted on its offshore debt in July 2022, said it “resolutely opposes the petition and continues to work toward offshore restructuring that maximizes value for stakeholders.”
Shimao's Hong Kong-listed shares fell more than 14% on Monday to a record low of HK$0.39.
China's real estate sector has been in a prolonged economic downturn since 2021, weighing on the construction industry and the broader economy, as well as a series of defaults on offshore debt accumulated during an earlier industry-wide boom. It's forcing developers.
The involvement of a prominent state-owned bank signals a new level of creditor frustration as real estate developers' cash crunch continues to worsen. So far, the Chinese government has emphasized the need to complete construction projects, but stopped short of unveiling formal measures to help struggling developers.
Jason Ho, Asia leader at FTI Capital Advisors, which focuses on corporate finance and restructuring in the region, said that while many large state-backed banks have been involved in offshore lending, one or two, including CCB, He said they were more “aggressive” and engaged in unfair transactions. A more “aggressive approach” to recovering assets.
He added that the liquidation motion is “significant” given Simao's size and CCB's well-known name compared to lesser-known creditors who have previously filed comparable cases.
Simao's sales in 2023 decreased by 5.7% from 2022 to RMB 59 billion ($8.2 billion). Simao, named after the father-son duo who started the business in 2001, outlined a restructuring plan in late March that included short- and long-term operations. Term bonds and convertible bonds.
Fellow developers Country Garden and Evergrande have also filed liquidation petitions in Hong Kong, despite the property developers having most of their assets in mainland China and being subject to a different legal system. , usually listed.
In January, Judge Linda Chan ordered Evergrande's Hong Kong subsidiary to be liquidated. The 2021 debt default comes more than two years after a series of similar failures by other companies in the industry. The company was unable to finalize a restructuring agreement with its offshore creditors.
Despite being seen as one of China's safest development companies, Country Garden defaulted on its debt in October and filed for liquidation in Hong Kong in February over a $200 million loan.
The company announced over the weekend that it had hired Linklaters as lead legal counsel and would “work with creditors to explore all viable options for offshore debt restructuring.”
A hearing in the Shimao case is scheduled for June 26 in Hong Kong's High Court, but China Construction Bank did not respond to a request for comment.
Additional reporting by Cheng Leng in Hong Kong
