Detention of chief at property firm Agile spooks market over debt
Share price plummets as house arrest of Chen Zhuolin raises doubts on loan due in December
Confirmation that Agile Property chairman Chen Zhuolin has been detained in China has deepened investors' concerns over the cash-strapped developer's ability to repay a US$475 million offshore loan that is maturing in December.
Global investment banks such as CLSA and Macquarie immediately slashed their target prices on Agile amid higher risks of potential lawsuits.
They also raised concerns about the impact on the property sector if the anti-graft inquiry was extended industry-wide.
Shares in the developer, suspended since October 3, plunged as much as 30.8 per cent yesterday after they resumed trading, before paring the loss through the day to close at HK$3.95, down 17.2 per cent.
The developer was embroiled in controversy after an online report that said Agile allegedly assisted in money laundering, and that former security tsar Zhou Yongkang had a close relationship with Chan Cheuk-yin, one of Agile's directors and also Chen's youngest brother. The report was denied by Agile.
Media reports had been swirling that Chen had disappeared. It was also reported by media in China that Agile officials involved in projects in Yunnan were under investigation.
On Friday, Agile quoted Chen's wife, Fion Luk Sin-fong, as saying that the Kunming city People's Procuratorate had ordered Chen to stay at a designated residence - a form of house arrest - beginning September 30. The company also cancelled a HK$2.8 billion rights offering that was supposed to take place that day.