Shimao, once hailed as one of China’s stronger developers, sued by UOB over terms of US$1.3 billion loan
- Shimao purportedly re-allocated loans and allotted shares between entities without the Singapore bank’s consent, UOB said in its July 12 writ in Hong Kong
- The accusations involve a 2017 agreement for UOB and other lenders to grant loan facilities of up to HK$10 billion (US$1.3 billion) to Shimao’s entity Adventure Success
UOB alleged that Shimao and the group entities breached terms of certain loan and security agreements, by purportedly re-allocating loans and allotting shares between the entities without the Singapore bank’s consent, according to a writ in the High Court of Hong Kong dated July 12.
The accusations involve the terms of an agreement from 2017 for UOB and other lenders to grant loan facilities of up to HK$10 billion (US$1.3 billion) to group entity Adventure Success. The terms were meant to secure the obligations of the unit, which holds a private residential land development project in Hong Kong’s Kowloon area.
Luxury builder Shimao, which ranked as China’s 22nd biggest by sales in the first half of this year, was once considered one of the country’s stronger developers. But it’s been trading at deeply distressed levels in the dollar bond market for months now. The company also suffered its first-ever default on a public note earlier this month, when it missed payment on a US$1 billion security.
Where are the white knights in China’s US$1.7 trillion property sector?
Shimao is among a growing number of real estate firms whose troubles have been mounting from last year, amid a sector-wide liquidity crunch sparked by a government crackdown on excessive borrowing and housing speculation that’s sent defaults to a record.
The developer’s public relations department declined to comment. A spokesperson at UOB also declined to comment.
Documents laying out the terms of the loan facilities included a so-called share charge -- a kind of pledge -- for another subsidiary Genuine Victory Holding’s 100 per cent holding in Adventure Success, according to the writ.
UOB alleged that the re-allocation of inter-companies loans, as well as allotment of shares that occurred on or around May 26 this year, led to Genuine Victory’s holding in Adventure Success being reduced to about 5.4 per cent from 100 per cent.
The bank demanded that the re-allocation and the allotment of the shares be set aside, among other claims.
