Huarong freezes new loans to developer Sunac

One of the nation’s most acquisitive developers now under the spotlight, as debt and leverage in the financial system comes under mounting regulatory scrutiny

PUBLISHED : Wednesday, 20 September, 2017, 7:32am
UPDATED : Wednesday, 20 September, 2017, 7:32am

China Huarong Asset Management, one of the country’s big four state-owned bad loan banks, has ordered a suspension of new lending to property giant Sunac China Holdings, as worries remain over high debt levels and the regulator’s intolerance to high corporate leverage.

Huarong’s risk department ordered a suspension of any new loans to Hong Kong listed property firm Sunac that haven’t already been signed, Bloomberg reported on Tuesday night citing an internal email.

Executives from Huarong confirmed the email and internal order with the South China Morning Post. Huarong also called for heightened risk monitoring and attention to existing loans and said any projects deemed necessary, with controllable risk, will need approval from Huarong’s headquarters.

The email cited the developer’s high leverage and debt as well as the regulator’s increased focus on “aggressive expansion” by Sunac, which is chaired by property magnate Sun Hongbin.

Beijing has stepped up its crackdown on money laundering and initiated a series of measures to keep a check on financial risks ahead of the 19th party congress, taking place in the capital from October 18.

Several of China’s largest overseas asset buyers, including billionaire Wang Jianlin’s Wanda Group have been placed under scrutiny since June.

The authorities ordered banks to suspend funding to Wanda’s six overseas projects late in late June, and several banks decided to suspended extending new loans to another active overseas acquirer, HNA Group in July.

Sunac, which specialises in luxury flats, has been on a buying spree since early this year, and caught national headlines in July with its notable 43.8 billion yuan (US$6.7 billion) purchase of more than a dozen tourism property projects from Wanda.

Nomura estimates Sunac has built up a 200 million square metre land bank. Fitch Ratings cut the firm deeper into junk status on July 12, citing what it called the company’s “acquisitive business approach.”

Shares in have has gained roughly 400 per cent since this year. As a result, the personal wealth of its chairman, Shanxi-born Sun, have quintupled to roughly HK$57 billion from HK$10 billion at the start of the year.