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Naomi Rovnick

Guangzhou property developer Skyfame Realty (Holdings) has become the second mainland firm in less than a month to enter winding-up proceedings after borrowing heavily from foreign banks and hedge funds at the height of the credit boom.
Ernst & Young was appointed as Skyfame's provisional liquidator late last Friday, three sources close to the company confirmed.
The Hong Kong-listed firm has not notified the stock  exchange and calls to its officials were unanswered.
The owner of Guangzhou's Westin hotel owes US$196 million to convertible bondholders including investment bank Merrill Lynch and hedge funds Avenue Partners, DKR Oasis Capital Management and PMA Investment Advisers, which lent it the cash in 2007.
The sources involved said a mystery creditor named Pioneer Express Holding petitioned the Hong Kong court on Friday to wind Skyfame up.
'We have absolutely no idea who that is,' one of the developer's foreign creditors said.
Last month, Shanghai-based Fu Ji Food and Catering Services Holdings put itself into provisional liquidation weeks before it was to repay HK$2.2 billion of convertible bonds it sold to global investors including the defunct Lehman Brothers Holdings in 2005-07.
Shareholders and bondholders could lose  heavily if Skyfame is liquidated. In Hong Kong, liquidators sell companies' assets then pay proceeds to creditors, in a certain order. Banks are paid out first, then bondholders. Shareholders, who are at the bottom of the pile, often receive nothing.
The sources involved in discussions said there was a crisis meeting yesterday between Skyfame, Ernst & Young, the bondholders and their adviser, Deloitte. The talks are set to continue today.
It was likely the bondholders' group would try to wrest Skyfame out of the liquidation process, the sources involved said.
They want to ensure Skyfame does not sell its valuable hotel property at a fire-sale price.
In  September, Skyfame agreed to sell properties worth 2.4 billion yuan (HK$2.72 billion), including the Westin, to HNA Group, the state-owned enterprise that co-owns Hainan Airlines with United States billionaire George Soros.
But the deal, on which HNA was supposed to sign terms last Friday, has not happened yet.
Skyfame has blamed its bondholders for the  hitch.
Last Monday, in an attempt to keep the funds from the real estate sale safe, Connecticut and Hong Kong-based hedge fund DKR Oasis appointed accounting firm Deloitte as receiver of Skyfame's companies legally registered outside the mainland.
Skyfame company secretary Julia Cheung told the South China Morning Post last Friday that DKR Oasis' move had 'upset' and 'frustrated' the sale talks because Deloitte had put its own staff in charge of the deal.
Skyfame is due to start repaying its bonds in May next year. 
It defaulted on key agreements with the bondholders in January and March when it, in turn, failed to repay a bank loan and could not secure crucial land use rights for a property development. The bondholders have been pressuring the developer to raise cash since.
Three years ago, most investment banks in Asia began aggressively courting their top hedge fund clients to invest with them in small mainland companies as a bet on burgeoning economic growth.
An article in banking magazine Finance Asia in April 2007 said these so-called private placements were 'about sophisticated investment banks putting their money to work alongside sophisticated hedge funds - with transformational consequences for companies like Skyfame'.
Ernst &Young, Deloitte and all Skyfame's bondholders declined to comment.
On the table 
In September, Skyfame agreed to sell properties to HNA Group worth, in yuan: 2.4b
Meltdown 
Key dates in the downfall of Skyfame Realty (Holdings) 
Jan 29 
Skyfame misses deadline to repay HK$220 million property development loan; defaults on convertible bond agreement 
March 31 
Company breaks another bond agreement by missing deadline to obtain permission for  property development 
Sep 11 
Reports first-half net loss of 396 million yuan Sep 18 Firm says it will sell property worth 2.4 billion yuan including Guangzhou's            Westin Hotel property to HNA Group 
Nov 2 
Bondholders owed US$196 million appoint  Deloitte as receiver of Skyfame's offshore companies, including vehicles which hold  properties being sold 
Nov 7  
Skyfame says the appointment of receivers has 'upset' and 'frustrated' property sale 
Nov 9 
Ernst & Young appointed as  provisional liquidator 
May 2010 
Bondholders entitled to get  money back 




Skyfame winding up after heavy borrowing