Fight for Shanghai Land's key assets heats up
Shanghai Land, the Hong Kong-listed vehicle of imprisoned property tycoon Chau Ching-ngai, is fighting for control of key operating assets in Shanghai in a bitter court battle with a mainland lender.
Shanghai Rural Credit Co-operatives Union had petitioned Shanghai's No1 Intermediate People's Court to seize assets in lieu of repayment of more than 655 million yuan in loans made to two wholly owned Shanghai Land subsidiaries, Shanghai Yihe Longbai Hotel and Shanghai Hongxin Real Estate Development.
The court surprised observers this month by agreeing to hear applications from Shanghai Land subsidiaries to invalidate the loans, which they argued had been taken out without board approval. Both subsidiaries are run by Shanghai Land's Hong Kong court-appointed receivers. Chinese courts are generally reluctant to recognise overseas-appointed receiverships.
Court hearings on the application have been scheduled for August 24 and September 7.
The loss of the hotel and the land-use rights held by the subsidiaries could jeopardise the Hong Kong listing status of Shanghai Land, whose shares have been suspended from trading for 13 months.
Without these assets, Shanghai Land would hold about HK$1.2 billion in cash but few if any significant business operations. The Hong Kong stock exchange might initiate delisting procedures against it for the loss of substantial business.
Shanghai Land receivers Kenneth Yeo Boon Ann and Stephen Liu Yiu-keung could not be reached for comment yesterday.
The dispute involves outstanding loans of 354.9 million yuan to Longbai and 301.4 million yuan to Hongxin, according to a Shanghai Land announcement released yesterday.
The Hotel Yihe Longbai in Shanghai and a prime parcel of Shanghai property held by Hongxin were used to secure the loans.
The bulk of the loans had been diverted to companies linked to Chau, who is serving a three-year prison term in the mainland for stock manipulation and other crimes.
Chau's Hong Kong company, privately held New Nongkai Global Investments, took out a HK$2.1 billion credit facility from BOC Hong Kong (Holdings) in May 2002 to finance its takeover of Hong Kong-listed wireless communications firm ImGo, which was later renamed Shanghai Land.
New Nongkai mortgaged its 75 per cent stake in Shanghai Land to obtain the loan, of which HK$741 million remains outstanding.
New Nongkai's receivers have been trying to find a buyer for New Nongkai's stake in Shanghai Land. The loss of the Shanghai assets could make the stake less attractive.
